Nationwide Building Society has entered into a preliminary agreement to take over Virgin Money for GBP2.9 billion, signalling greater consolidation within the UK's mid-sized lenders.

If the transaction is completed, the combined entity will have total assets of approximately GBP 366 billion, making it the second largest provider of mortgage and savings products in the UK. Virgin Money, currently the UK's sixth largest retail bank by assets, boasts around 6.6 million customers and a total loan portfolio of GBP72.8 billion, including GBP57.1 billion in mortgages.

This acquisition represents the latest chapter in the evolution of Virgin Money. The company, which was originally founded as the financial services arm of Branson's Virgin brand in the 1990s, was transformed into a retail bank following the acquisition of Northern Rock from the UK government in 2012. Subsequent £1.7bn mergers with Clydesdale Bank and Yorkshire Bank in 2018 shaped its current form.

Nationwide's offer of 220p per Virgin Money share, including a final dividend of 2p, represents a 38% premium to the share price before the deal was announced. This potential transaction reflects a wider trend of consolidation within the UK retail and mortgage banking industry. Last month, for example, Barclays announced its intention to take over the banking division of Tesco, the UK's largest supermarket group, for around GBP600 million.