Rock plunges as suitors' low offers emerge

The crisis-torn bank disclosed that it has received several proposals and is expecting more, but that none of them is an outright takeover bid.

The Newcastle-based former building society said: "Based on the information it has so far, the board of Northern Rock believes that the range of values for the existing equity implied by the proposals is materially below the market price at the close of business on Friday."

Northern Rock shares closed last week at 132.6p, valuing it at £559 million. But the Evening Standard has learned that the proposals received so far value the business at less than half that value. Earlier this year the bank was valued at £5.2 billion.

Today the reconstructed board, led by chairman Bryan Sanderson, said: "The value to shareholders from any proposals (and indeed any other strategic options available to the company) remains highly uncertain and will be dependent, among other things, on when and if there is an improvement in market conditions including access to liquidity and the value created, if any, from the run-off of the assets and liabilities remaining in the company following any disposal of all or part of its business."

Northern Rock said that it had received two kinds of proposal so far. They are to:

Invest in the company (including through an injection of assets as well as new capital).

Acquire parts of the business or assets of the company.

It is understood that the company, through its advisers, Blackstone, Merrill Lynch and UBS, has received between eight and ten expressions of interest, although only Virgin Group and Olivant, the investment vehicle of former Abbey boss Luqman Arnold, disclosed their plans. Today's share price collapse will give added impetus to Northern Rock's largest shareholders, hedge funds RAB Capital and SRM, who will this week demand that Sanderson calls off the sale.

The two funds have built up a 13% stake since the run on the bank in September, paying way above the current share price.

They have made it clear that they now favour a management buy-in, as proposed by Arnold, which could leave some value for shareholders rather than a fire sale of the assets which Jon Wood of SRM has declared a "farce".

David Buik of City bookmaker Cantor gives his own personal take on the runners and riders in the Northern Rock stakes:

THE NORTHERN ROCK CLAIMING STAKES

After Chancellor Darling has addressed the House of Commons, the following should come under orders for this staying race. Entries will be expected to get 4 miles in a bog and stay longer than "the mother-in-law!"

JC FLOWERS – This is a group one performer and they know exactly how many beans make four.  Financial engineers par excellence – No flies on them and no favours.  They will be swinging on the bridle at the business end of this race! – 7/4

VIRGIN MONEY – the people's favourite but despite RBS standing four square behind with £20 billion, the management is not top pedigree and lacks experience.  Sir Brian Pitman had a terrific track record at Lloyds TSB, but he's almost as old as God!  What can he bring to the party? – 5/2

OLIVANT – Luqman Arnold is out of the top drawer, but the markets have their doubts about the pedigree of the rest of the team.  May not stay the trip – 7/2

ING – Very good balance sheet and would love to further infiltrate the UK apart from ING-Direct.  Dutch banks tend to be very conservative and this may just be a bridge too far in terms of risk – 5/1

CERBERUS – despite having GMAC and AIG in support, there are many who believe that this private equity titan has sufficient on its plate with deals such as Chrysler – 8/1

APOLLO – Regardless of an excellent pedigree this operation with ING must be considered the betting rags of this contest.  Late on the scene and attracting good management could be a problem – 8/1

Maximum Bet: £50.00 – Minimum bet £5.00.  Bets must be made by mid-day on Friday 23rd November 2007.