/ 12 October 2007

Virgin eyes bid for Northern Rock

Britain’s Virgin Group, controlled by entrepreneur Richard Branson, is in talks to take over troubled bank Northern Rock, a person familiar with the matter said on Friday.

The cellphones-to-flights group could lead a consortium including Middle East and United States investors that would inject cash in exchange for a controlling stake and stabilise funding at the troubled bank, the source said.

The group could make a proposal as early as today, but the timing was uncertain, he added.

Virgin and Northern Rock both declined to comment.

Northern Rock shares jumped as much as 6% as Virgin joined several other companies circling the lender, which was offered emergency funding by the Bank of England a month ago after facing a funding crisis, sparking the first run on a major UK bank for over 140 years.

By 8.15am GMT, Northern Rock shares were up 3,8% at 267,75 pence, valuing the bank at just over £1,1-billion ($2,24-billion).

Branson, one of the world’s highest profile businessmen, pushed Virgin into financial services in 1995.

Virgin Money now offers credit cards, insurance, savings and pensions, and also offers products in Australia and South Africa.

Newcastle-based Northern Rock is estimated to have borrowed almost £13-billion from the Bank of England in the last four weeks at a punitive interest rate.

Britain’s government threw it a fresh lifeline on Tuesday, offering to guarantee new retail deposits and extend funding arrangements, but analysts widely expect it to be taken over.

Northern Rock, advised by Citigroup and Merrill Lynch, said on Tuesday that talks with suitors were continuing.

US buyout firms Cerberus and JC Flowers are considering moves on the bank, according to other sources familiar with the matter. British and US newspapers have also named Blackstone, Lone Star and Apollo as possible suitors. – Reuters