Members' vote on £2.9bn Virgin Money deal would break takeover rules, Nationwide claims

As part of the deal, Virgin Money will be required to pay Sir Richard Branson an exit fee of £250 million. Photo: Roberto Finizio/Getty Images Author

This is because the takeover rules do not allow for voluntary voting, which is not legally required under the Building Societies Act 1986.

A Nationwide spokesman said: “Nationwide's board has agreed that a binding offer to acquire Virgin Money is in the best interests of the community and its current and future members, following full consideration and appropriate due diligence, and taking into account members' comments.

The building society appears to have carried out a survey of more than 150 clients and members, which found that nearly half were positive about the deal.

Baroness Ros Altmann, Member of the Chamber Lords, was among those calling for Nationwide members to be allowed to vote on the takeover.

She told The Telegraph: “The essence of mutual collaboration is that it involves participants. This is a huge amount of money — many of them are likely to be disappointed that they were not consulted.»

A former pensions minister has warned that neglect of members could jeopardize the mutual building model.

However, Labor MP Gareth Thomas, chairman of the All Party Parliamentary Group on Mutual Investment, said the deal would create a stronger building society and extend the benefits of the mutual model to new markets such as business banking.

He said : “A thriving peer-to-peer sector benefits consumers and increases competition. More generally, we need to make it easier for other mutuals to grow and raise capital.”

Virgin Money's board has recommended shareholders accept the deal, which is expected to be completed in the fourth quarter of this year.

As part of the deal, Virgin Money will be required to pay Sir Richard Branson a £250 million exit fee as well as annual licensing fees of £15 million as the lender rebrands as Nationwide.

> The billionaire, who licenses the Virgin brand through Virgin Enterprises, will also receive a further £400 million from his 14.5% stake in the lender.

David Duffy, chief executive of Virgin Money, will step down. once the deal closes, it is expected to generate a windfall of £12 million. He will be replaced by Chris Rhodes, currently Nationwide's chief financial officer.

The acquisition will create a combined group with approximately 24.5 million customers, more than 25,000 employees and almost 700 branches.

Nationwide said branches in each region where the combined group operates will remain open until at least early 2028.