Northern Rock shares rise following Arnold’s plan

by Richard Kilner

Story link: Northern Rock shares rise following Arnold’s plan

Northern Rock shares have risen today, following the news that Luqman Arnold, one of the City’s big hitters, is interested in salvaging the struggling firm.

The shares rose by 6.5% to reach 154.4p, which puts the bank’s value at approximately £652m.

Yesterday Arnold confirmed he would be putting forward a proposal to the bank, aided by a team of experienced individuals from Olivant.

Other parties are also interested in Northern Rock, including Richard Branson’s Virgin Group and the US firm JC Flowers.

This Friday is the deadline set by the bank for bids.

The Olivant proposal would entail the current chairman, Bryan Sanderson, and chief executive, Adam Applegarth, remaining in place and working alongside the Olivant team. It is also the only plan that would not see the firm either broken up or sold on.

Under the proposal Olivant would take a minority stake in Northern Rock.

Luqman Arnold has a distinguished career, and, as chief executive, stabilised Abbey prior to it being purchased by Banco Santander.

Earlier in his career he worked for UBS where he assisted in the aftermath of the Long Term Capital Management crisis in 1998.

It is speculated that Northern Rock chairman Bryan Sanderson favours Arnold’s proposal, in addition to a number of senior shareholders.

The central concept behind the bid is that the Northern Rock business plan is fundamentally sound, and that improving consumer confidence is key to success. The financial rewards for Olivant would be delivered by a recovery in Northern Rock’s share price.

It is believed that Arnold has already spoken of his plan with both the FSA and the Bank of England.