Virgin Money offer for Church House Trust Plc
The boards of Church House Trust and Virgin Money are pleased to announce that they have reached agreement on the terms of a unanimously recommended offer to be made by Virgin Money to acquire the entire issued and to be issued share capital of Church House Trust.
Virgin Money's application to become the controlling shareholder of a bank, namely Church House Trust, has already been approved by the Financial Services Authority (FSA).
The acquisition of Church House Trust will provide the platform from which Virgin Money will develop a retail banking business in the UK - offering a full range of products to consumers under the "Virgin Money" brand.
Research conducted by Virgin Money over the past two years has shown consistently that there is a clear consumer demand for Virgin Money to enter the banking market. The research demonstrates that Virgin Money would be both a trusted deposit taker and mortgage lender.
Virgin Money currently has over 2.5 million customers and offers payment cards (credit cards and prepaid cards), savings and investments products (stakeholder pensions, children's pensions, employers pensions, FTSE tracker ISA, bond and gilt ISA, climate change ISA, cash ISA and unit trusts), general insurance products (motor, home, travel and pet) and life assurance products to the UK market.
Church House Trust is a regional bank offering deposits and mortgages. Highlights of Church House Trust's banking model include:
No reliance on wholesale markets for funding
No borrowing from other banks
Retail deposits of more than double its loan book
A broad range of savings product
A focus on detailed personal underwriting.
Following the acquisition of Church House Trust, Virgin Money will be well capitalised with an initial Tier 1 ratio in excess of 35% and will inject £37.3 million of new capital into Church House Trust. Liquidity management will also reflect best practice and the business will focus on the controlled growth of retail deposits.
Virgin Money operates from three locations in the UK: Edinburgh, London and Norwich. For the financial year ended 31 December 2008, (the last date to which audited accounts of Virgin Money have been prepared), Virgin Money reported turnover of £98.4m and profit before tax of £27.5m. The banking business of Church House Trust operates from Yeovil in the UK. For the financial year ended 31 December 2008, (the last date to which audited financial statements of Church House Trust have been prepared), Church House Trust reported operating income of £4.05 million and profit before tax of £0.45 million.
Under the Offer, Church House Trust Shareholders will be entitled to receive 509.2 pence in cash and 1.0294 Contingent Loan Notes, for each Church House Trust Share.
A Loan Note Alternative will also be made available to Church House Trust Shareholders as an alternative to the cash consideration receivable under the Offer.
The Offer (including the Contingent Loan Notes at a valuation of 90 pence per £1 nominal value) values the entire issued and to be issued share capital of Church House Trust (assuming exercise of all outstanding options under the Church House Trust Option Schemes) at approximately £12.28 million. If the Offer becomes or is declared unconditional in all respects, in addition to the cash and Contingent Loan Notes comprising the Offer Price, Qualifying Shareholders will also, following the passing of the resolutions at the Church House Trust General Meeting on 11 December 2009, receive the Distribution as described on page 13 of this Announcement.
The Church House Trust Directors, who have been so advised by Europa Partners Limited, unanimously consider that the terms of the Offer and the Distribution (even if no value is ascribed to the Distribution) are fair and reasonable. In providing advice to the Church House Trust Directors, Europa Partners Limited has taken into account the Church House Trust Directors' commercial assessments of the Offer and the Distribution. The Church House Trust Directors unanimously recommend Church House Trust Shareholders to accept the Offer.
Virgin Money has received irrevocable undertakings to accept, or procure acceptance of, the Offer from the Church House Trust Directors who hold, in aggregate, 352,387 Church House Trust Shares, representing in aggregate approximately 21.2 per cent. of the existing issued share capital of Church House Trust. In addition, Virgin Money has received irrevocable undertakings in respect of an aggregate of 740,502 Church House Trust Shares from other Church House Trust Shareholders, representing approximately 44.6 per cent. of the existing issued share capital of Church House Trust. In total, therefore, Virgin Money has received irrevocable undertakings to accept, or procure the acceptance of, the Offer in respect of 1,092,889 Church House Trust Shares representing in aggregate approximately 65.8 per cent. of the existing issued share capital of Church House Trust. In addition, Virgin Money has received irrevocable undertakings in respect of options over 319,426 Church House Trust Shares under the Unapproved Share Option Schemes and revocable undertakings in respect of options over 14,740 Church House Trust Shares under the Approved Option Scheme from Church House Trust Optionholders to accept the Option Offer, so as to exercise their options and accept the Offer in relation to the Church House Trust Shares they acquire immediately before the Offer becomes or is declared unconditional in all respects. These irrevocable undertakings will lapse only in the event of the Offer lapsing or being withdrawn.
Sir Richard Branson, Founder of the Virgin group said: "The Church House Trust business offers us a strong platform for growth. Virgin Money aims to bring simplicity to the UK banking market which has traditionally been a complex sector."
Jayne Anne Gadhia, Chief Executive of Virgin Money said: "The financial crisis has tarnished the reputation of many UK banks. Virgin Money will provide a better, different form of banking to its customers, increasing competition in the sector. Our aim is to make ‘everyone better off' in the way we do business by offering good value to customers, treating employees well, making a positive contribution to society and delivering a growing profit to shareholders. Our approach to banking is founded on developing a sustainable, savings-based business. We see the acquisition of Church House Trust as a strong and sensible first step in delivering Virgin Money's banking ambition."
David Batten, Chairman of Church House Trust said: "The sale of Church House Trust to Virgin: Money represents a good outcome for the business, its shareholders and its customers. Church House Trust's conservative business model has proven to be attractive to Virgin Money as a sound base from which to fulfil its banking ambitions."
Quayle Munro Limited is acting as financial adviser to Virgin Money and Europa Partners Limited is acting as financial adviser to Church House Trust.