Virgin loses “preferred” status in Northern Rock sale

by Gill Montia

Story link: Virgin loses “preferred” status in Northern Rock sale

Virgin Group has lost its “preferred bidder” status in the battle for Northern Rock because rival bidder, Olivant, has threatened to withdraw from negotiations unless it is treated equally with Sir Richard Branson’s company.

The decision was taken at a meeting between Northern Rock, the Bank of England, the Financial Services Authority and the consortium led by Olivant, the investment company headed by Luqman Arnold, the former chief executive of Abbey bank.

The move will give Olivant the access it needs to the banks funding the Virgin bid.

Northern Rock shareholders are reported to be in support of the Olivant bid because it values their shares at around £1 each, considerably above the Virgin offer.

However, in a BBC interview, Sir Richard Branson has warned that “shareholders have to realise that if Virgin doesn’t get this away it’s likely no one will get this away, and it’s likely that it will end up being nationalised and the shareholders will get nothing”.

Meanwhile Olivant is asking for the sale to be completed speedily because of the damage being caused to the bank’s brand by the slow pace of proceedings.

Yesterday, Northern Rock’s chief executive, Adam Applegarth, resigned ahead of schedule and with immediate effect.

This did little to comfort shareholders as the bank’s share price fell; however in a trading update Northern Rock reported that its September profits forecast still stands and that it expected to record underlying pretax profits of between £500 million and £540 million, in 2007.