JUDGING by the share price reaction alone, there was no shortage of positive sentiment towards CYBG’s takeover approach for Virgin Money when the details became clear yesterday morning. Shares in Virgin put on 30.9p or nearly ten per cent and there was a boost to CYBG too, with its stock rising 3.6p or 1.1% as the City signalled their approval for the move.
The reaction was reflected by comments from analysts, who pointed to a range of benefits they expect to flow from a deal. Indeed, if there was a noteworthy trend from the commentary it was how unsurprising the news of the prospective merger had been.
There is clear sense that the two organisations would complement each other well, that something greater could emerge from the combination of CYBG’s strength in the SME lending market and branch presence with Virgin’s brand profile and presence in the mortgage market. Then there are the benefits which naturally emerge when two companies pool resources, including the potential for cost savings. That should theoretically strengthen their hand if they are to provide a meaningful challenge to the big four UK banks.
Some words of caution were expressed, though. With the TSB digital meltdown continuing to reverberate, one analyst pointed out the risks inherent in combining two bank IT platforms. What good, after all, is the promise of a bigger, more competitive bank if consumers can’t carry out the simplest of transactions?
The analysts have now had their say. It is now over to the Virgin shareholders to decide whether a deal is worth pursuing, should a formal bid be forthcoming from CYBG.
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