Virgin poised to ok branding deal which will smooth Virgin Money sale to CYBG; shareholders demand cost cuts - reports
11 JUN 2018
Virgin Group is understood to be on the verge of approving CYBG’s use of the well-known company brand after Virgin Money is taken over, The Sunday Times reported. CYBG’s offer for Virgin Money rests on securing the brand licensing agreement, the unsourced report said.
CYBG and Virgin Enterprises are in licensing negotiations. Virgin Enterprises currently receives approximately GBP 8m (USD 11m) royalties annually from Virgin Money, equivalent to 1% of revenues, the report said. A post-merger deal is expected to be calculated according to a similar formula, equating to annual payments of around GBP 17m from the enlarged business, the item reported.
However, the fee would begin at a lower rate as CYBG is expected to gradually roll out the Virgin brand across its various products as Virgin Money beds in, the report said.
CYBG has until 18 June to launch a formal offer or walk away, the item noted.
Meanwhile, The Sunday Telegraph reported that major Virgin Money shareholders are demanding assurances of cost cuts before they will support the CYBG deal. One unidentified top-10 investor quoted in the piece demanded a credible plan which would result in a minimum of 15% shaved off the combined group’s cost base. This could involve as many as 1,500 redundancies, with further savings potentially coming from operational and IT efficiencies, the report said.
The original reports appeared in The Sunday Times, Business & Money section, page 3; The Sunday Telegraph, Business & Money section, page 1