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Branson planning Northern Rock bid
Robert Lea, Evening Standard12 Oct 2007
Sir Richard Branson has emerged as an 11th-hour would-be saviour of Northern Rock.
Branson's Virgin Money is understood to be racing to meet a deadline of later today to put in a proposal to take control of the stricken building society-turned-bank.
Branson's plan is to merge his credit cards, investment products, life insurance and pensions business into Northern Rock's substantially mortgage-based business.
The enlarged business would be renamed Virgin Money.
Leading the running for Branson is his highly regarded chief executive of Virgin Money Jayne-Anne Gadhia, who was lured back to the business this year with the specific remit of relaunching Virgin into the lucrative but highly competitive mortgage business.
Gadhia had run Branson's previous venture into the mortgage industry with the Virgin One account, launched a decade ago.
That was a joint venture with Royal Bank of Scotland and RBS bought Branson out in 2001. At that time Gadhia switched to head RBS's mortgage book.
When Gadhia, 46, returned to run Virgin Money this year, she pledged to launch products that would see Virgin initially capture up to 1.5% of the market.
A spokesman for Virgin confirmed the group is attempting to put a consortium together to finance a bid. "We are speaking to large international investment groups and banks to see what we can do," he said.
While there are doubts about whether Virgin's talks are far enough advanced to put in a serious bid by the deadline, there is speculation that Merrill Lynch, the investment bank overseeing potential suitors for Northern Rock, could yet let the deadline slip to get in as many offers as possible.
Virgin is believed to have been working on an offer for Northern Rock for three weeks. It is understood Virgin executives have met and had talks with senior Northern Rock directors and that Virgin Money officials have spoken to the Treasury and Bank of England over a possible bid.
Virgin Money is 100% owned by Virgin Group but its products are effectively fronts for other financial organisations, such as the MBNA credit card giant and Scottish Widows, Lloyds TSB's life and pensions arm.
Branson would need to be backed by serious financial firepower to ensure that Northern Rock's £13 billion emergency funding by the Bank of England could be refinanced. Virgin Money might also need the financial expertise of a High Street bank or former building society to run Northern Rock's mortgage book which has captured around 10% of the UK market.
Any Virgin offer could run into stiff opposition from a number of American investment funds including JC Flowers and Cerberus.
Northern Rock shares were on the march again today, gaining 12p 270p. They hit a low of 132p on 1 October.
Reader views (1)
Please find Ralph Punter and Adam Applegarth - We want to know why no one is available at N Rock to answer the questions on behalf of the negative equity mortgages - all the clients with the fatal - Together Mortgages are in trouble. You cannot get anyone at N Rock to be helpful - They are prepared though to add to the woes by offering more expensive loans. Not allowed to leave - will not negotiate the huge penalties on the loans - but if you stay with N Rock they will give you another mortgage which is worse than the previous one which means you will never ever own your home. The FSA's - TCF policy ( treating customers fairly ) is a joke - it does not apply to the Exploiting Big Mortgage banks because the FSA needs their licence fees. No one in the media takes up these points with the FSA. I don't think that Branson has any idea about the level of debt N Rock is wrapped in. The most scary aspect of Branson's offer is that MBNA might be involved. My advice to all Northern Rock's mortgage borrowers Re-mortgage and run for your life. It couldn't get worse than Branson and MBNA.
- Melanieprendiville, Westminster - London, 13/10/2007 12:02
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