Virgin reject hedge fund stakeholders objections to Rock bid

by Richard Kilner

Story link: Virgin reject hedge fund stakeholders objections to Rock bid

The Virgin consortium that has bid for struggling bank Northern Rock, and been named as the bank’s favoured bidder, has retaliated against the hedge fund stakeholders who claim that the offer materially undervalues the bank and who are seeking to prevent the bid from being successful.

The chief executive of Quayle Munro, Peter Norris, who advises the consortium has expressed a total lack of surprise at the claim.

Norris has stated that a great deal of research was conducted by the consortium prior to the bid being revealed, adding that no bids would be necessary had the bank managed itself properly in the first place.

Norris is well-known as the man who resigned from Barings bank following its collapse in the wake of illegal dealings which racked up £800m of debts.

His remarks follow SRM Global’s move yesterday and the day before to increase its stake in the bank. SRM is a hedge fund, based in Monaco, and the largest shareholder in Northern Rock. It is firmly opposed to the Virgin offer, as is fellow hedge fund and second largest stakeholder, RAB Capital.

Virgin’s offer puts the Rock’s total value at £250m.

Presently SRM has a 9.1% in the bank, with RAB holding 7%.

Confidence is a key issue regarding the worth of a bank, Norris has said, dismissing the share price (which has risen since Monday when Virgin was named as the preferred choice of the bank) as not the whole story and describing them as just one aspect of the bank’s value.

Norris went on to describe how enormous the task facing Virgin was, and he said that the consortium did not underestimate just how challenging resurrecting Northern Rock would be, particularly given the turbulence in the financial markets.

Quayle Munro believe that their bid has two distinct advantages over rivals Olivant and JC Flowers.

Firstly, Virgin enjoys a well-recognised a trusted brand, which none of the other competitors bidding for the bank can boast of.

Secondly, the consortium has the services of two top class bankers, Sir Brian Pitman and Sir George Mathewson. Sir Brian was formerly the head of Lloyd’s TSB, and Sir George has worked as the chief executive of the Royal Bank of Scotland.