Payment/Compensation to Virgin Account Holders re sale to Nationwide

EllieDog

I am interested in Forum members views in the aspect of Virgin Money making a payment to its account holders following its sale to Nationwide. This is due to be formally completed in April.
The reasons I raise this question are
!. Virgin were paid 2.8 Billion for its sale
2. Nationwide gained 2.3 Billion when Virgin Money was valued at 5.1 Billion
3. As a thankyou to its account holders/ members for enabling it to make the purchase by adding money through their accounts Nationwide gave each of them a £50  
The only parties that have not received anything for this sale are the Virgin Money account holders who are the most affected by this sale. As with Nationwide it is the customers of Virgin Money who have raised the value of the bank enabling it to be sold for 2.8 Billion. No account holders. No Bank
I am directly impacted by this sale. I live in Enniskillen, Northern Ireland and opened a Virgin account to avail of no fees on foreign exchange as I frequently cross the boarder into Ireland. I have made numerous purchases in Ireland using the Virgin Debit Card saving quite a bit of money as a result.
Virgin say that there will be no 'immediate' changes to account terms and conditions but I note from another forum thread that the licence to use the Virgin brand by Clydesdale and Yorkshire Banks was due to expire in 2028.
I have looked at Nationwide and found that the no exchange fees perk is only available on fee paying accounts. I and others opened accounts with Virgin Money because their terms and conditions suited our circumstances. We have now been sold to Nationwide. 
To add insult to injury, as Martin and his Team will be aware, Nationwide are now offering a £175 inducement to open an account. No doubt his is financed from their 2.3 billion windfall from the purchase of Virgin Money.
I realise there may be no legal requirement for Virgin Money to pay compensation to its account holders but is there a moral obligation?    

Section62

EllieDog said:

...
I realise there may be no legal requirement for Virgin Money to pay compensation to its account holders but is there a moral obligation?    

No chance.

molerat

You are just a customer of Virgin, Nationwide members own the society.  Customers don't get anything when a company is bought out but the owners / shareholders of the buying company can receive part of the resulting benefit.

Woodstok2000

Virgin had assets of £5bn. That doesn't mean it was worth £5bn to a buyer.  The deal involved a significant premium on the share price, so from that perspective you might say Nationwide paid over the odds.

Kim_13

Banks have offered switching incentives from time to time and indeed Nationwide did so long before the subject of their buying Virgin Money came up. 

There may be an impact in terms of Nationwide not offering free overseas usage, in which case it would be prudent to open another account that offers this (for example Starling or Chase) in case Nationwide should opt to remove it from your Virgin branded account. 

A business or anything else is only worth what someone is prepared to pay for it. Virgin didn't have to accept Nationwide's offer - but decided they didn't want to be in the financial services market any longer for whatever reason. If you don't like the deal that was done, then the logical thing to do would be to bank with neither going forward. 

A number of Nationwide customers weren't happy about the deal, which might explain why they paid their qualifying customers £50. As they were exiting the market, Virgin obviously weren't concerned with trying to placate their customers. Nationwide could have chosen to pay Virgin's as well, but that would cost more and annoy Nationwide's customers who had been with them for X years and who were getting the same as customers who had just been taken over. Virgin's shareholders had to agree to the deal but Nationwide's didn't get a say.

If they do remove the free overseas usage, you could put a complaint in and mention that you had been disadvantaged while also not benefitting from a £50 payment when the deal completed. It might get a 'go away' payment.

friolento

I agree with others, you stand no chance to get any payment for the merger. You can, however, get a lot more by thinking outside the box.

There are numerous other accounts which have no overseas use fees. 

One of them, Club Lloyds, currently pays you £250 for switching your Virgin account to them. See the separate forum thread on this for the exact T&Cs etc.

You can easily avoid the monthly charge of the Club Lloyds account by making sure you deposit the minimum monthly amount to waive the fee, and you can easily downgrade the account to a fee-free one once you got paid the £250.

If you don’t like the CL account for some reason, there are other accounts from time to time which pay you a switch bonus. A switch pays you way more than the booty Nationwide members got, and you might feel better for having voted with your feet 👞👟🥿🩴👠😉.

In addition, if you ever want to go back to Nationwide, they also do switch offers from time to time 😉

Essex123

Woodstok2000 said:

Virgin had assets of £5bn. That doesn't mean it was worth £5bn to a buyer.  The deal involved a significant premium on the share price, so from that perspective you might say Nationwide paid over the odds.

Nationwide paid a premium over the undisturbed share price, but they still paid substantially less than the value of Virgin’s net assets.  

Hence on closing they paid approx £2.8bn and booked an immediate gain of £2.3bn.  The booking of this gain implies that Nationwide agreed the value of the net assets acquired, otherwise they would have written them down in line with their accounting policies. 

TheBanker

I don't think you have a legitimate grievence here. I have accounts with both Nationwide and Virgin so am on both sides of the fence.

As a Nationwide Member, I own a tiny part of Nationwide, so the money they used to buy Virgin was my money, and part of the profit they've made is therefore mine. That's why I got the £50 (in simple terms). Exactly the same as Tesco Bank customers, who didn't get a 'bonus' when Tesco Bank's savings accounts were sold to Barclays - any profit on the deal would have been for the Tesco and Barclays shareholders. 

As a Virgin customer I simply use the services they offer as a customer. I have no control over how the company is managed. I have no ownership of the company. At the moment, Nationwide haven't changed the way my Virgin account operates. If they do in future, they will have to give notice, and I'll have the option to accept the change, switch to another Nationwide/Virgin account or switch to a different bank. Whatever changes Nationwide made, could have been made anyway. There is no guarantee Virgin would have kept the same fee structure, no guarantee they would have renewed the Virgin brand license, and no guarantee that they wouldn't have sold to someone else - Nationwide weren't the only interested party. 

As of 2 April, Virgin customers will be Nationwide members, so in future should qualify for Fairer Share payments and similar incentives. But for the current financial year, they're just customers, the same as customers of Natwest or Lloyds. I mention these banks because they've also made large profits, but they pay them to their owners (shareholders) in the form of dividends, which is also what is happening to the profit Virgin make.

That's not to say that, when the formal merger happens, Nationwide won't decide to give some kind of "welcome bonus" to Virgin customers - but if they do it will be exactly that - a bonus.

Woodstok2000

Essex123 said:

Woodstok2000 said:

Virgin had assets of £5bn. That doesn't mean it was worth £5bn to a buyer.  The deal involved a significant premium on the share price, so from that perspective you might say Nationwide paid over the odds.

Nationwide paid a premium over the undisturbed share price, but they still paid substantially less than the value of Virgin’s net assets.  

Hence on closing they paid approx £2.8bn and booked an immediate gain of £2.3bn.  The booking of this gain implies that Nationwide agreed the value of the net assets acquired, otherwise they would have written them down in line with their accounting policies. 

I don't think anyone is questioning the valuation of the assets, but £5bn in assets does not mean your business is worth £5bn. VM were struggling to deliver growth, particularly in mortgages, and were suffering from a funding disadvantage versus larger banks, which meant they had thinner margins.

They were historically off target on below-the-line costs, and in the year prior had  announced a plan to invest a further £130m in cybersecurity, which had not been expected by the market and so was not in forecasts. Consequently, the profits they generated were well below where they needed to be.

A business is only worth what someone is willing to pay for it...

masca

Nationwide used to offer free banking abroad until they stopped being "Proud to be different", their then slogan. They didn't compensate customers for the change of terms.  I would recommend Starling bank for free debit card useage abroad.  I have a Virgin credit card which I hope will continue to offer free use abroad after the move to Nationwide, but only time will tell.

Essex123

Woodstok2000 said:

Essex123 said:

Woodstok2000 said:

Virgin had assets of £5bn. That doesn't mean it was worth £5bn to a buyer.  The deal involved a significant premium on the share price, so from that perspective you might say Nationwide paid over the odds.

Nationwide paid a premium over the undisturbed share price, but they still paid substantially less than the value of Virgin’s net assets.  

Hence on closing they paid approx £2.8bn and booked an immediate gain of £2.3bn.  The booking of this gain implies that Nationwide agreed the value of the net assets acquired, otherwise they would have written them down in line with their accounting policies. 

I don't think anyone is questioning the valuation of the assets, but £5bn in assets does not mean your business is worth £5bn. VM were struggling to deliver growth, particularly in mortgages, and were suffering from a funding disadvantage versus larger banks, which meant they had thinner margins.

They were historically off target on below-the-line costs, and in the year prior had  announced a plan to invest a further £130m in cybersecurity, which had not been expected by the market and so was not in forecasts. Consequently, the profits they generated were well below where they needed to be.

A business is only worth what someone is willing to pay for it...

Total assets of VM were much higher than £5bn (e.g all of the mortgage lending would have been classed as assets on their balance sheet).  The £5bn was net assets and as part of the acquisition Nationwide would have assessed the value of these assets (likely ranging from cash to intangible assets) to them and adjust the value if necessary. 

This article gives a good background.

https://www.theguardian.com/business/2024/nov/27/nationwide-gain-virgin-money-takeover

To be able to report a £2.3bn gain on acquisition using their own accounting methodologies shows anything but overpaying.