Nationwide Building Society has agreed terms for a takeover of Virgin Money in a £2.9bn deal that would create a larger rival to the UK’s major lenders.

While nothing has been finalised, the offer on the table would see the two brands continue to be run as separate entities, with the Virgin Money brand retained for around six years.

No material changes to the size of Virgin Money’s 7,300-strong workforce were expected “in the near term”, Nationwide said.

The all-cash offer of 220p per Virgin Money share represented a premium of 38% to Virgin Money’s share price on Wednesday.

A planned 2p a share dividend payout would come on top of that payment, a statement by the pair added.

The expanded company would become the country’s second largest mortgage and savings group by market share, should a takeover proceed.

It would be worth around £366.3bn, with total lending and advances of about £283.5bn.

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The mutual said the deal would be funded through its existing cash resources and allow it to offer a wider range of products and services to its members.

Nationwide chief executive Debbie Crosbie said: “Importantly, Nationwide will remain a building society, and a combined group would bring the benefits of fairer banking and mutual ownership to more people in the UK, including our continuing commitment to retain existing branches, as part of our ‘Branch Promise’ and leading levels of customer service.

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“We believe the combination would create a stronger and more diverse business that will be better placed to deliver value to our members and customers, both now and in the future.”

Virgin Money UK’s chairman, David Bennett, added: “The board of Virgin Money is pleased that Nationwide recognises the considerable strengths and opportunities that exist across our business, with the potential acquisition delivering attractive value for our shareholders.

“We are confident that a combination would support an exciting new chapter for Virgin Money to benefit from Nationwide’s scale and ambition.”

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