British tycoon Richard Branson could scoop a massive personal cash windfall as a reward for struggling challenger bank Virgin Money’s ditching its Virgin branding after a bumper takeover bid.
Virgin Money, the U.K. bank part-owned by Branson, announced last week that it was the subject of a takeover bid from banking rival Nationwide for £2.9 billion, causing its share price to soar.
Virgin says it is inclined to recommend the potential offer to shareholders, which represents a significant premium on the bank’s value.
If the deal goes through, Branson, who owns a 14.5% stake in the bank, is set to take home at least £420 million ($539 million).
However, if Nationwide decides to wind up the Virgin Money name, the billionaire could be in line for an even bigger reward from an obscure brand licensing agreement.
Branson branding bonus
Under the terms of the takeover bid, Nationwide says it plans to rebrand and eventually dissolve the Virgin Money name four years after its acquisition.
That could help Branson pocket an additional £250 million ($321 million) as part of an “exit fee,” according to calculations made by The Times of London.
That would bring Branson’s total compensation from the deal to around £670 million ($860 million).
Branson licenses Virgin Money under his Virgin Enterprises brand, which has interests in everything from music to fitness to aerospace.
The Times calculated that this could translate into annual payments of £60 million for Branson while Nationwide continues to use the name, in addition to the £250 million exit fee. This is a speculative estimate as the banks haven’t finalized a financial agreement.
Representatives for Virgin Group and Nationwide declined to comment.
The branding agreements penned under Branson’s empire have proved to be a boon for the tycoon in previous acquisitions.
In February last year, the group won a $160 million legal battle with Alaska Airlines, which required the airline to pay Virgin a licensing fee even though it had stopped using the Virgin brand years ago.
Alaska bought Virgin Group subsidiary Virgin America Inc. in 2016, two years after the airline penned a licensing agreement with its parent. A judge ordered Alaska to pay an $8 million minimum royalty fee until 2039.
Branson’s banking ambitions come to an end
Branson, who made his first fortune from his media empire, entered the banking world almost three decades ago when he founded Virgin Money in 1995.
It wasn’t until he bought the nationalized bank Northern Rock in 2011 for £747 million ($1.18 billion) that Branson was able to boast of owning a genuine challenger to incumbent banks.
Virgin Money was later bought by Clydesdale and Yorkshire Bank Group (CYBG) in 2018 for £1.7 billion ($2.68 billion). CYBG paid Virgin and Branson a royalty fee to continue using the brand’s name.
However, Virgin had difficulty elevating the challenger bank to take on the U.K.’s traditional financial powerhouses, including its prospective new owner Nationwide.
Shares in the bank have stagnated since its last acquisition in 2018.
The bank missed profit expectations last year as it increased its provision for bad loans resulting from rising credit card arrears as more people missed payments during the cost of living crisis.
