Nationwide Building Society is set to take over smaller rival Virgin Money after the pair agreed a deal worth around £2.9 billion.

Nationwide has made a 220p-a-share firm offer for Virgin Money, including a planned 2p-per-share dividend payout, which will now be voted on by Virgin Money shareholders.

Confirmation of the deal comes after the two companies reached a preliminary agreement earlier this month, with Nationwide having spent the past two weeks looking through Virgin Money’s books before making the firm offer.

Nationwide said: “Nationwide’s board agreed that a binding offer to acquire Virgin Money was in the best interests of the society and its present and future members, following full consideration and the appropriate due diligence, and after taking comments from members into account.”

Virgin Money chief executive David Duffy will stand down on completion of the deal, which is expected during the final three months of 2024, while Nationwide boss Debbie Crosbie will head up the enlarged group.

Chris Rhodes, chief financial officer of Nationwide, will take on the position of chief executive of Virgin Money.

The planned takeover will bring together Britain’s fifth and sixth largest retail lenders, creating a combined group with around 24.5 million customers, more than 25,000 staff and nearly 700 branches.

But the move will spell the end of the Virgin Money brand, with Nationwide planning to rebrand the Virgin Money business as Nationwide within six years, although it will keep the two brands initially.

Nationwide said it will keep a branch in each location where the combined group is present, until at least the start of 2028 – announcing that it has extended its branch promise by another two years.

Nationwide said it does not intend to make any “material changes” to the size of Virgin Money’s 7,300-strong workforce within the first year, but it is assessing the employee needs of the combined group and expects there to be some “limited” impact on back office staff.

“There may be some limited workforce changes to reduce the size of overlapping central functions relating to Virgin Money ceasing to be a standalone publicly listed company,” the groups said.

Nationwide also stressed it will remain a mutual building society if the deal goes ahead and is given the green light by Virgin Money’s shareholders.

The society said it will not need to put the deal to a vote of its members, “having taken appropriate legal and financial advice”.

But there have been calls for Nationwide to give its 16 million members a say on the deal, with member of the House of Lords and former pensions minister Ros Altmann among those recently reported to believe members should get a vote.

While the deal will see Nationwide become Britain’s second-biggest savings and loans group, it will also see the mutual become a far bigger player in business banking and also take on the old business of Northern Rock, which was nationalised at the start of the financial crisis.

Virgin Money bought Northern Rock from the Government in January 2012.

Ms Crosbie said: “This acquisition strengthens Nationwide and means we can offer more value and broader services for our current and future members.

“More people will experience the benefits of mutual ownership and the customer-focused approach of a building society.”

Sir Richard Branson’s Virgin Group Holdings, which has a stake of around 14.5% in Virgin Money, has already given its backing to the Nationwide deal.

It will see his group net more than £400 million from the sale, while Nationwide has also agreed to pay Virgin Group an exit fee of £250 million, plus royalties.

Shares in Virgin Money, which soared earlier this month on news of the deal, jumped another 2% on Thursday.

Mr Duffy said: “The proposed combination with Nationwide presents an exciting opportunity to build on Virgin Money’s significant strategic and operational progress.”

Virgin Money is the UK’s sixth largest retail bank, with around 6.6 million customers and total lending of £72.8 billion.

The group has 91 branches, which has been scaled back significantly in recent years after a series of closures due to the shift towards online banking.

Virgin Money was formerly the Clydesdale and Yorkshire bank group CYBG and rebranded after a £1.6 billion takeover of Sir Richard Branson’s banking group in 2018.

Nationwide is Britain’s biggest building society with 605 branches and 18,000 staff and claims to have the UK’s single largest network of branches.