Virgin 'to lose bidder status'

14-12-2007

Virgin 'to lose bidder status'
A consortium led by Sir Richard Branson's Virgin Group is to effectively lose its status as Northern Rock's preferred bidder, reports have claimed.

Without citing sources, Sky News said it had been informed of the planned move, while the Times newspaper claims the development took place last night after rival bidder Olivant threatened to walk away from the Northern Rock race.

The investment firm, headed by former Abbey chief executive and veteran troubleshooter Luqman Arnold, said it would abandon its offer for the Newcastle-based lender unless its bid was placed on an equal footing with Virgin's, the paper reports.

It says Northern Rock bosses agreed to the measure during a meeting with representatives of the Olivant consortium and officials from the Treasury, Bank of England and Financial Services Authority (FSA).

Olivant has also demanded the sale process be speeded up, it has been claimed.

However Virgin chairman Sir Richard last night claimed his company had more than a 50/50 chance of its £1.5 billion bid for Northern Rock succeeding, claiming the approach was the "best offer on the table for shareholders".

His comments come in the wake of claims by some Northern Rock investors that the Virgin bid undervalues the bank.

Speaking to Channel 4 News about the matter, Sir Richard said: "It's all very well people saying they're willing to pay more than Virgin.

"Unless they're actually willing to put up the kind of capital that we're willing to put up - £1.5 billion - and unless they're taken seriously by the government and the Treasury, there's no point in them making rash promises."

Northern Rock opened up to offers after it found itself at the centre of the first run on a British bank in almost 150 years in September, when it was forced to turn to the Bank of England for an emergency loan.

The lender is subsequently believed to have borrowed further cash from the central bank, having initially approached the institution because it was unable to raise sufficient funds on the wholesale money markets due to the global credit crunch.

In a statement yesterday the troubled lender confirmed it was still in talks with Virgin, Olivant and other parties over its future – while revealing it would take a £281 million hit as a result of its exposure to current problems in the credit markets.

Northern Rock also revealed its chief executive Adam Applegarth had left the company, after announcing his intention to stand down in November. He will be replaced by Andy Kuipers, formerly responsible for coordinating Northern Rock's sales, marketing, products and pricing initiatives.

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