Thursday 18th October 2007
Northern Rock could be taken over by financial services group Virgin, it has been revealed.
A consortium advised by Scottish businessman Sir George Mathewson has been formed in order to undertake the transaction, Virgin Money announced on Friday.
Under the terms of the deal, Northern Rock would technically acquire Virgin Money in exchange for equity, but would then itself be rebranded as a Virgin company under the consortiums management.
Virgin asserts that a "more sustainable funding structure" would thus be put in place, as Northern Rock has historically been a high-risk lender.
This would be achieved by the injection of "a substantial cash sum" from Virgin Money into Northern Rocks existing operations.
Sir Richard Branson, chair of the group, comments: "I believe that if were successful well be able to create an exciting new banking alternative for everyone in the UK.
"I and my team have pulled together a heavy-hitting consortium that we believe has not only the knowledge and expertise but the financial clout to make a once-great British institution great again."
The consortium includes the Virgin Group itself, along with insurance group AIG Financial Products, First Eastern Investments, Toscafund Asset Management and WL Ross & Co, an investment group specialising in buyouts.
Northern Rock responded to press coverage of the proposal by revealing that it is in talks with "a number of potentially interested parties" relating to various possible deals.
But the lender asserted that all discussions remain at an early stage and there are no guarantees that any transaction will go through.
"Northern Rock does not expect to make any further announcement in relation to these discussions until such time as there is clarity as to the outcome of its strategic review," the financial services provider concluded.
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