The owner of Clydesdale and Yorkshire Banks CYBG has made a revised offer to merge with Virgin Money and form a challenger worth £4bn.

The offer was confirmed in a joint statement from the two company’s yesterday evening, adding that they had reached an agreement with the Panel on Takeovers and Mergers to extend the deadline on a takeover decision to 18 June.

Before this agreement had been reached, CYBG was required by takeover law to make a firm offer of intent before 5pm today, 4 June.

Both lenders have said that the merge would create the UK’s “first national banking competitor”, offering both personal and SME customers an “enhanced alternative to the incumbent banks”.

At the beginning of May, CYBG made a preliminary approach to Virgin Money, valuing the company at £1.6bn with an offer of 1.1297 of its shares for each Virgin Money share. However, the new bid offers 1.2125 new CYBG shares for every Virgin Money share, which would provide Virgin Money shareholders with 38 per cent ownership of the combined group.

Both firms have said that they recognise “the potential for accelerated value creation” as a result of the merger.

If the merger does go ahead, it would create a personal and SME banking group with 6 million customers and a £70bn balance sheet.

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