Challenger bank Virgin Money announces IPO but private investors are excluded from sale

2nd October 2014

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Challenger bank Virgin Money has today announced plans to float on the London Stock Exchange but private investors will be excluded from the sale writes Philip Scott.

In a statement, the bank which is part owned by Sir Richard Branson, said it expected that the offer of new shares will raise gross proceeds of approximately £150m.

This will comprise an offer of ordinary shares to certain institutional investors in the United Kingdom and elsewhere outside the United States. As such, retail investors in the UK will not be able to participate in this issue at launch.

Richard Hunter, head of equities at Hargreaves Lansdown said: “It is disappointing that Virgin have chosen to exclude private investors, particularly given the ubiquity of its brand and the nature of its business. Nonetheless, it is an uncomfortable truth that, given the relatively small amount being raised, in terms of convenience and speed to market this may be the prudent financial choice for Virgin Money.”

The bank which snapped up Northern Rock in 2011, said it will pay £50m to the Treasury to settle what it still owes.

When Virgin Money agreed to buy the failed bank, it was agreed that this payment would be made in the event of a successful IPO of the combined businesses before the end of 2016. This payment therefore will take the total paid by Virgin Money to the Treasury to £1.02bn.

Since 2012 mortgage balances at Virgin Money have increased from £14.1bn to £20.3bn while deposit balances have risen from £16.3bn to £21.1bn. The company also launched the first Virgin Money personal current account and acquired £1bn of credit cards from MBNA. It now has 2.8m customers and a national network of 75 stores.

Jayne-Anne Gadhia, chief executive officer of Virgin Money, said: “Over the last three years we have transformed our business. We have expanded our product range, increased our customer numbers, grown our balance sheet and enhanced our profitability. Our decision to take the business public marks just how far the company has come.

“We look forward to being a listed company and remain committed to delivering positive outcomes for all of our stakeholders. Our capability to deliver growth at meaningful scale, the quality of our balance sheet and our absence of legacy issues makes us stand apart from other banks, and these strengths give us the potential to deliver ongoing returns to our shareholders through both capital growth and progressive dividend payments.”

Each Virgin Money employee will be given £1,000 worth of shares in the business upon flotation.

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