Business World

Saturday 18 November 2017

Virgin in pole position to land troubled Northern Rock

SIR Richard Branson's Virgin Money today looked to be in pole position to land Northern Rock as the auction of the nationalised lender nears its conclusion.

Final bids for the Newcastle-based bank are due this week, with the Sunday Times reporting that Virgin will pip buy-out vehicle NBNK to the prize.

The sale is likely to crystallise a loss of at least £400 million for taxpayers, who pumped in £1.4 billion after the bank's collapse four years ago.

Meanwhile, Lloyds Banking Group is expected to veto a straight sale of the retail banking business that it must spin off to meet competition rules.

The Sunday Telegraph said a stock market flotation of the Project Verde business, which includes 632 branches, was now a near certainty.

It is another blow for NBNK, which was the only remaining bidder after placing a valuation on Verde of less than half its book value, or £1.5 billion.

NBNK, which is led by Lord Levene and former Rock chief executive Gary Hoffman, viewed the Lloyds branches as the base for a move on Northern Rock, which it believes would be too small to survive as a standalone bank.

Virgin's other rival for Northern Rock, the American private equity firm JC Flowers, is reportedly on the brink of dropping out of the bidding process.

Virgin is backed by Wilbur Ross, the billionaire Wall Street investor, as well as an Abu Dhabi investment fund and a large British pension fund.

The current eurozone financial crisis, which has led to fears over the stability of the European banking system, is likely to have drained the appetite of bidders for both banking operations.

Lloyds has reportedly been told by its advisers that a flotation of the business in November 2013, the deadline for the divestiture, offered the best prospect of attaining the highest price for the business.

Hugh Osmond's Sun Capital Partners has already pulled out of the bidding, while Co-operative Banking Group has not yet decided whether to make an offer.

Lloyds is being forced to divest the branches by the European Union in return for the £20 billion in state aid it received following the 2008 credit crisis.

Press Association

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