BOQ charges credit card to snap up Virgin Money
The regional lender said on Wednesday it would snap up exclusive rights to Virgin's brand in Australia, which has more than 150,000 credit card, insurance and superannuation customers.
BOQ will pay $30 million of the deal price in its own stock and about $10 million in cash. It will get exclusive use of Virgin's brand in Australia for up to 40 years.
The lender will also pay Mr Branson's company a royalty and Virgin Group will get a seat on the board of Bank of Queensland.
The deal is the latest chapter in Virgin Money's long-running attempt to grab a bigger slice of the financial services market in Australia, after previous tie-ups with Westpac and Macquarie Bank failed to deliver.
BOQ managing director Stuart Grimshaw said the deal would give the bank a greater chance to sell financial products including home loans and credit cards to a wider range of customers, especially younger people.
While Virgin is currently loss-making, BOQ aims to use the brand as a distribution network to increase its consumer banking market share of about 2 per cent.
"They're growing their customer base at greater than 20 per cent per annum, whereas most banks are struggling to get into single-digit growth of customer numbers," Mr Grimshaw said.
Brian Bissaker, the previous head of Colonial First State, will become chief executive of Virgin Money Australia. The deal would dilute earnings a share by 1 to 2 per cent next financial year because of the extra stock issued, BOQ said.
The deal comes after Mr Branson relaunched Virgin Money in Australia with financial backing from Citi in 2010, vowing to take on the big banks. Citi will continue to provide the "white-label" credit cards under the deal with BOQ. The US bank also provides BOQ's credit cards.
Frequently Asked Questions about this Article…
BOQ bought the exclusive rights to use the Virgin brand in Australia and snapped up Virgin Money's Australian business for A$40 million. The deal gives BOQ access to Virgin's customer base of more than 150,000 credit card, insurance and superannuation customers, plus ongoing brand and distribution benefits.
BOQ will pay about A$30 million of the deal in its own stock and roughly A$10 million in cash. The agreement also includes royalty payments to Richard Branson's company and grants BOQ exclusive use of the Virgin brand in Australia for up to 40 years, with Virgin Group receiving a seat on BOQ's board.
Virgin Money Australia has more than 150,000 customers holding products such as credit cards, insurance and superannuation, which BOQ expects to use as a distribution network to sell a wider range of consumer banking products.
Yes. BOQ has said issuing the extra stock as part of the purchase will dilute earnings per share by about 1 to 2 per cent in the next financial year.
BOQ aims to use the popular Virgin brand to reach younger customers and expand its distribution for products like home loans and credit cards. Management says Virgin's Australian business has been growing customer numbers at more than 20% per year, which BOQ hopes will help increase its consumer banking market share from about 2%.
Brian Bissaker, the former head of Colonial First State, will become chief executive of Virgin Money Australia following the deal.
Citi will continue to provide the 'white-label' credit card platform under the deal. Citi already provides BOQ's credit cards and will keep supporting the Virgin-branded card arrangements.
Yes. Although Richard Branson's Virgin Money Australia has been loss-making, the Virgin Group will receive royalties under the deal and will have a seat on BOQ's board, while BOQ holds exclusive use of the Virgin brand in Australia for up to 40 years.
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