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Shareholder threatens to block Virgin takeover of Northern Rock

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by Kay Mitchell

Northern Rock is again in crisis as its largest shareholder threatened to block Sir Richard Branson’s takeover of the crisis-torn bank. Jon Wood, hedge fund manager, has insisted that the board of Northern Rock reviews alternative bids. Jon Wood has built up an 8.5% stake through his vehicle SRM Capital.

Together with RAB Capital, Mr Wood owns more than 15% of the shares, which could be enough to oppose any takeover bid. Both hedge funds are in favour of an alternative offer being put forward by private equity group Olivant, run by Luqman Arnold, the City stalwart and former Abbey chief executive.

Earlier this week, Mr Arnold was expected to enter formal talks to take over Northern Rock. Mr Arnold and his team proposed to pay market prices for a 15% stake in Northern Rock and bring in a management team of experts to transform the bank and said that it is able to move immediately.

Philip Richards of RAB Capital said the Virgin bid values the shares too low. Shareholders have also been criticised the choice of Virgin Money boss Jayne-Anne Gadhia to run Northern Rock after a takeover.

The Virgin consortium, which 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. Sir Richard Branson is putting up £200m of his own money.

If a deal is not reached, the bank could be placed into administration or nationalised.

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News posted: November 29, 2007

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