VOTE now! Proposed take over of Virgin Money - Nationwide members should be given a vote

eskbanker

Millyonare said:

eskbanker said:

Millyonare said:
And they don't seem to have a handle on IT integration (different legacy systems).

But on what basis are you and others concluding this, and contending that you know better?  Of course their offer documents refer to the need to conduct the integration projects, which will start by developing and refining understanding from what can be determined prior to offering, but in itself that doesn't support the apparent assertions that they don't know what they're doing?

Plenty of IT experts in the industry press quoted as saying VM's IT systems are a mess. Nationwide will spend years and years unravelling the digital spaghetti -- and then knitting it all back together again.

It's a high price paid for a struggling second-tier bank with a sprawling mish-mash of struggling legacy brands and legacy IT systems.

As the old saying goes... an eagle plus a turkey doesn't make an eagle 😉

https://www.computerweekly.com/news/366573297/Nationwide-IT-infrastructure-poised-to-absorb-Virgin-Money

https://www.ft.com/content/2aff65fe-d435-4520-bfbb-d5e086a56543

I'm not necessarily disagreeing with any of that, but as readily available material in the public domain it misses the point, in that I'm simply challenging the apparent contention that this is all new information that NW won't be aware of!  Hence my original question:

Surely the question here isn't whether the IT integration would be risky and expensive, but by how much (if any) would it be more risky and expensive than the NW board understands

pafpcg

In a world where it is increasing difficult not to be cynical about corporate actions, I'll add another observation about this takeover debate: 

The Nationwide board will have a team (probably from outside) advising them on strategy.  One of the topics will be managing public expectations and one group in particular: Clydesdale Bank PLC's shareholders.  These shareholders need to be convinced to sell their shares to Nationwide at the price offered.  There could be a campaign to highlight the deficiencies of Clydesdale's IT operations, the cost of merging old Clydesdale & old Virgin Money systems and the difficulties of integrating Clydesdale's systems with any other potential suitor all in order to manipulate current shareholders into accepting Nationwide's offer as the best outcome.  Such a campaign could well involve making derogatory posts about Clydesdale's systems and the detrimental impact on Nationwide's financial health post-merger in places where the shareholders will see them - MSE could well be such a place.

For anyone who really doesn't want this takeover to proceed, trying to dissuade Nationwide from within is, I believe, doomed to failure; the only tactic that stands any chance of stopping it would be to make Clydesdale Bank PLC's shareholders believe that Clydesdale has a viable and profitable future on its own.  In other words, boost Clydesdale/Virgin Money's successes, the attractiveness of their products, the reliability and ease of use of their systems and the competence of their staff.

Disclaimer:  I've been a member of Nationwide for nearly forty years investing in many of their products.  I've also had accounts at Clydesdale & Virgin Money for almost ten years.

Millyonare

eskbanker said:

Millyonare said:

eskbanker said:

Millyonare said:
And they don't seem to have a handle on IT integration (different legacy systems).

But on what basis are you and others concluding this, and contending that you know better?  Of course their offer documents refer to the need to conduct the integration projects, which will start by developing and refining understanding from what can be determined prior to offering, but in itself that doesn't support the apparent assertions that they don't know what they're doing?

Plenty of IT experts in the industry press quoted as saying VM's IT systems are a mess. Nationwide will spend years and years unravelling the digital spaghetti -- and then knitting it all back together again.

It's a high price paid for a struggling second-tier bank with a sprawling mish-mash of struggling legacy brands and legacy IT systems.

As the old saying goes... an eagle plus a turkey doesn't make an eagle 😉

https://www.computerweekly.com/news/366573297/Nationwide-IT-infrastructure-poised-to-absorb-Virgin-Money

https://www.ft.com/content/2aff65fe-d435-4520-bfbb-d5e086a56543

I'm not necessarily disagreeing with any of that, but as readily available material in the public domain it misses the point, in that I'm simply challenging the apparent contention that this is all new information that NW won't be aware of!  Hence my original question:

Surely the question here isn't whether the IT integration would be risky and expensive, but by how much (if any) would it be more risky and expensive than the NW board understands

Sounds like semantics.

NW has already overpaid for VM (excessive PE ratio). If they can't get the un-complicated finance right, what chance of getting the complicated IT right. They've over-estimated the value of VM. It's not a stretch to believe they’ve under-estimated the tech mess of VM.

Time will tell, of course. But 70-90% of mergers fail (mostly) because of over-paying and under-integrating. NW has already ticked 1 of those 2 boxes.

26left

I think both Virgin Money and Nationwide’s management teams have their own advisors - the takeover documents spell it out and who they are.

But I think there are a few things going on here that you have to disaggregate:

1) what’s best for the shareholders of Clydesdale trading as Virgin Money? The board of VM has recommend the deal to their shareholders. And at 40pc premium to the undisturbed share prize - and no other offers - it’s unlikely the shareholders will reject it. But at least they get a say. It’s hard for see how they’d do better carrying on as they are, when management and board want to sell. 

2) what’s best for the members of Nationwide building society - which can clearly be different to 1.  But I think is best divided into two key questions:

 A/ should members be given a vote? The founding ethos of the society as a mutual is that they should. And some interpretations of the law (BSA86) would support this also.  But management and the board are not prepared to put it to a deal, based on their advisors interpretations of the rules and law.

 B/ is this a good deal for Nationwide members? Both cases for and against have not been made in any detail. Management have put forward a headline case only for the deal - but by their own admission in the takeover docs, they have not done the detailed work as to the implications of a takeover.   

Clearly people fall into different camps e.g.
- people who are apathetic to the whole thing
- people who think a vote is not necessary 
- people who believe a vote should be held - but might be pro or undecided with regards to the takeover 
- people who are against the deal and see a member vote as the best way to stop it

I am sure there are other permutations, and ways of drawing a distinction. But I don’t think those Nationwide members asking for a vote (for whatever reason) are best served by trying to influence VM shareholders!

eskbanker

Millyonare said:
NW has already overpaid for VM (excessive PE ratio). If they can't get the un-complicated finance right, what chance of getting the complicated IT right. They've over-estimated the value of VM. It's not a stretch to believe they’ve under-estimated the tech mess of VM.

That's all opinions, which may or may not be valid - it may not be a stretch to believe they've underestimated the IT integration but it is a stretch to claim it as fact without any apparent evidence to support it, even if you choose to dismiss that distinction as semantics....

wmb194

Millyonare said:

eskbanker said:

Millyonare said:

eskbanker said:

Millyonare said:
And they don't seem to have a handle on IT integration (different legacy systems).

But on what basis are you and others concluding this, and contending that you know better?  Of course their offer documents refer to the need to conduct the integration projects, which will start by developing and refining understanding from what can be determined prior to offering, but in itself that doesn't support the apparent assertions that they don't know what they're doing?

Plenty of IT experts in the industry press quoted as saying VM's IT systems are a mess. Nationwide will spend years and years unravelling the digital spaghetti -- and then knitting it all back together again.

It's a high price paid for a struggling second-tier bank with a sprawling mish-mash of struggling legacy brands and legacy IT systems.

As the old saying goes... an eagle plus a turkey doesn't make an eagle 😉

https://www.computerweekly.com/news/366573297/Nationwide-IT-infrastructure-poised-to-absorb-Virgin-Money

https://www.ft.com/content/2aff65fe-d435-4520-bfbb-d5e086a56543

I'm not necessarily disagreeing with any of that, but as readily available material in the public domain it misses the point, in that I'm simply challenging the apparent contention that this is all new information that NW won't be aware of!  Hence my original question:

Surely the question here isn't whether the IT integration would be risky and expensive, but by how much (if any) would it be more risky and expensive than the NW board understands

Sounds like semantics.

NW has already overpaid for VM (excessive PE ratio). If they can't get the un-complicated finance right, what chance of getting the complicated IT right. They've over-estimated the value of VM. It's not a stretch to believe they’ve under-estimated the tech mess of VM.

Time will tell, of course. But 70-90% of mergers fail (mostly) because of over-paying and under-integrating. NW has already ticked 1 of those 2 boxes.

It’s the book value that counts with banks not the P/E ratio. Nationwide might have ideas on how to address the ‘E’ anyway e.g., synergies. Through all sorts of misjudgments, this isn’t to say that these sorts of corporate actions don’t have a long history of destroying shareholder value though.

pafpcg

26left said:

........

Clearly people fall into different camps e.g.
- people who are apathetic to the whole thing
- people who think a vote is not necessary 
- people who believe a vote should be held - but might be pro or undecided with regards to the takeover 
- people who are against the deal and see a member vote as the best way to stop it

I am sure there are other permutations, and ways of drawing a distinction. But I don’t think those Nationwide members asking for a vote (for whatever reason) are best served by trying to influence VM shareholders!

Then maybe there's another camp:

- people who are against the deal and see a Clydesdale Bank PLC shareholder vote as the best way to stop it.

"... those Nationwide members asking for a vote (for whatever reason)"

For what reason would any Nationwide member be asking for a vote on Nationwide making a takeover bid other than to stop the takeover? 

If you believe, as I do, that asking for a vote for Nationwide members (and winning a majority) is a lost cause, then the only hope for anyone against the deal must be to influence VM/Clydesdale Bank PLC shareholders.  

Unless there's some other option?

masonic

It's been widely reported that Nationwide intends to phase out the VM brand, so all this talk of an IT integration seems to be a red herring. What would make most sense, and what would be kindest in the circumstances, would be to turn off the life-support machine as soon as practicable. That would involve a migration rather than an integration.

PosterBoy77

masonic said:

It's been widely reported that Nationwide intends to phase out the VM brand, so all this talk of an IT integration seems to be a red herring. What would make most sense, and what would be kindest in the circumstances, would be to turn off the life-support machine as soon as practicable. That would involve a migration rather than an integration.

This itself does not seem that likely. The main justification for Nationwide buying VM is apparently to get into Business Banking, and taking on the Business Banking customers. These accounts offer facilities that Nationwide don't offer within their own systems. It would in the very least require a migration and enhancements to their systems.

WillPS

callum9999 said:

WillPS said:

Section62 said:

eskbanker said:

26left said:

eskbanker said:

PosterBoy77 said:

I don’t think anyone suggesting that management aren’t aware of these challenges. It’s that they’re not being transparent about it with members and giving them the chance to vote. Effectively this could be a costly transaction twice over - billions to buy VM, and billions again to restructure and integrate VM. There’s no transparency as to how dilutive this will be, how it will be financed, and how much weaker Nationwide would be if it goes ahead. 

My post quoted at the start of this exchange was in response to a number of posts yesterday afternoon in which the tone seemed to be that NW management don't understand what they're getting into - the transparency issue of how (or if) this is shared with members is a separate one IMHO.

With the lack of transparency and consequent absence of information, it ultimately comes down to trust.  Each member is left to make their own judgement whether the current senior management team can be trusted to get things right.

Personally, when the SMT greenlight an advetising campaign, the first TV advert of which ends up being banned for being misleading, my view is that they need to do a whole lot more to convince me they are the right people to be trusted to do the job.

https://www.bbc.co.uk/news/business-68711510

Did NW management know what they were getting into when they signed off spending a not inconsiderable amount of member's money on an advert which got banned for being misleading?  And yes, 'it is a different thing' - but if you can't get basics and smaller stuff right then I think it is fair to question some of the bigger stuff.

It's not just a different thing, it's a totally different thing. 

Who's to say that flirting with the edge and gaining a bit of extra publicity as a result wasn't part of the plan? If so, it's worked.

In any case there's an AGM vote on the board's remuneration every year, if you're not happy you know how to vote (and probably you know exactly how little difference it'll make).

Oh I'm about to be all cynical again - it wouldn't be, perhaps, that you're determined to paint a negative picture of the society and its management regardless of what they do; would it?

I think it's beyond ridiculous to suggest that Nationwide planned for the ASA to publicly call them liars and emphasise through the mainstream media that they have been closing branches at a not dissimilar rate to their competitors, when the entire point of the campaign was to publicise their branch commitment...

I agree it has nothing to do with this merger, but trying to justify it makes your impartiality look pretty poor (making your last line pretty amusing!).

The ASA didn't call them liars and I'm not supporting anything, just pointing out that the coverage today all mentioned the branch promise and so will have driven awareness further - and also highlighting rabble rousing as I alluded to upthread.

I'm not trying to appear impartial, I'm not - my position is I don't care about the actions of the board at all. As with all my banking arrangements, I trust those in charge to do what they need to do to ensure the sustainability of the business without need for intervention from me. If the products/benefits are good, I will use them; if they're not, I wont. Nationwide's board don't owe me or any individual member anything and if I no longer like the cut of their jib I'll simply go elsewhere. One might ask rhetorically why these other wronged members can't do the same.