Clydesdale and Yorkshire Bank owner CYBG and Virgin Money confirmed on Monday morning that CYBG has made a revised proposal to acquire Virgin Money and that the two companies are now “in discussions regarding an all-share combination to create a new national competitor in UK banking.”

Last month, Newcastle and Edinburgh-based Virgin Money Holdings said it received a preliminary and conditional all-share takeover offer from CYBG that would have valued Virgin Money at roughly £1.6 billion.

CYBG now has until June 18 to make a firm offer or walk away from Virgin under UK Takeover Panel rules, although the deadline could be extended further with the consent of the takeover panel, at Virgin Money’s request.

On Monday morning, CYBG said: “Under the terms of the revised proposal, CYBG would acquire the entire issued and to be issued ordinary share capital of Virgin Money on the basis of an exchange ratio of 1.2125 new CYBG shares for each Virgin Money share, which implies that Virgin Money shareholders would own approximately 38% of the combined group.

“Virgin Money shareholders would also be entitled to retain any dividend declared and paid in respect of the interim period ending 30 June 2018, subject to the reservations set out below in this announcement.

“In determining that it would enter into discussions with CYBG, the board of Virgin Money noted the improvement in the terms of the proposal (a seven per cent. increase in the exchange ratio as compared to the announcement on 7 May 2018), and, in particular, the potential for accelerated value creation through an upfront premium …

“Discussions are ongoing regarding other terms and conditions of the proposed combination and reciprocal due diligence is being conducted.

“Separate discussions and due diligence are also ongoing between CYBG and Virgin Enterprises Limited in respect of the license of the Virgin Money Brand to the combined group, which is a pre-condition to the proposed combination  …”