Virgin preferred suitor for Northern Rock

A consortium led by Sir Richard Branson’s Virgin Group has been confirmed as the preferred buyer for crisis-torn Northern Rock and is being backed by the Treasury. Virgin’s offer includes an immediate repayment of £11 billion of the £25 billion owed to the Bank of England.

Virgin’s consortium, which also includes buyout firm WL Ross, investment group Toscafund and Hong Kong-based investment group First Eastern, will inject £1.3 billion of new cash into Northern Rock.

Half the cash will come from the consortium and half will be raised through a rights issue at 25 pence per share. The consortium will also inject Virgin Money, the Virgin financial services company, into the bank, with an implied valuation of £250 million.

Shareholders have a large stake in the company and will therefore have a strong influence in deciding its future and if they block the deal, the bank could be placed into administration or nationalised.

The new business would be re-branded Virgin Money, however it will retain its existing stock market listing.

The consortium said it currently has no intention of making ‘any material reduction’ in employment in Northern Rock and plans to continue operating at its base in the North-East.

Bryan Sanderson, Northern Rock’s chairman, described the proposed deal as “very good news” for the bank.

Others expressing an interest in Northern Rock include private-equity groups, JC Flowers, Cerberus, Blackstone and Apollo. In addition, Luqman Arnold, the City stalwart and former Abbey chief executive, also launched a proposal to rescue Northern Rock.

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