The Nationwide Building Society has agreed to buy Virgin Money in a £2.9 billion deal – a rare example of a mutual taking over a listed bank.

Nationwide’s members do not need to formally agree the move but Virgin’s shareholders will have to back the plan.

The deal would create one of the UK’s largest mortgage and savings groups: all of Virgin Money’s 7,300 employees would “in the near term” but the Virgin Money brand will be phased out over six years once the proposed takeover is completed.

Virgin Money is the UK’s sixth largest retail bank with around 6.6 million customers and 91 branches. Nationwide will keep a branch in each location where the two businesses are present until at least 2026.

The 220p-a-share price offered by Nationwide is 38 per cent higher than Virgin Money’s closing share price at the time of the offer and at the start of the weekend the bank said it was “minded to recommend it” to shareholders.

Nationwide is known to want to bolster and diversify streams of funding, tap into business deposits, and extend its services. After completion of the proposed takeover, Nationwide would be worth around £366 billion with total lending and advances of about £283 billion.

Reaction within the industry has been supportive.

The chief executive of My Community Finance, Tobias Gruber, says: “While Nationwide has long been associated with security and safety, in recent times we’ve seen it reinvent itself, underscored by a recent brand refresh. As disruptors like Monzo and Revolut reshape the banking landscape, established banks have been sluggish to adapt. In contrast, Nationwide appears to have emerged from the shadows, seizing the opportunity to lead the charge in confronting the digital challenger banks head-on.”

Susannah Streeter, head of money and markets at Hargreaves Lansdown, comments: “The Virgin Money board is minded to accept the deal, which …  may not be surprising given the difficulties faced by the company over the last year amid swirling cost-of-living pressures increasing credit card arrears. There will be some hand-wringing again over yet another listed company leaving the London Stock Exchange. Valuations are weak, weighed down by the highly sluggish economy, and to some extent the lingering effects of Brexit.”