Virgin Money set to join the big league

Norfolk is set to join the banking big league with the takeover of Northern Rock by Sir Richard Branson's Virgin Money.The Norwich-based financial services company was yesterday named preferred bidder for the stricken bank.

Norfolk is set to join the banking big league with the takeover of Northern Rock by Sir Richard Branson's Virgin Money.

The Norwich-based financial services company was yesterday named preferred bidder for the stricken bank.

Virgin Money's chief executive Jayne-Anne Gadhia will lead the combined business which will see the Northern Rock name scrapped in favour of the Virgin brand.

The move will propel Virgin Money from a niche operator specialising in credit cards and insurance, to one of the country's biggest financial services businesses.

Under the proposals the Virgin-led consortium will inject £1.3bn of funds into Northern Rock in return for a controlling stake of at least 55pc.

Virgin plans to repay £11bn of Northern Rock's £25bn loans from the Bank of England immediately, and expects to repay the remainder in the next two to three years.

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In an open letter to Northern Rock customers Sir Richard said he was hoping to bring about a fresh start for the bank.

“At Virgin we have always seen change as a force for good and we have some exciting plans that will not only bring about a fresh start for Northern Rock but also provide real benefits to you as an existing customer,” he said.

Ms Gadhia meanwhile stressed the key role staff at Virgin Money in Norwich had played putting together the bid.

She said: “If we did not have a solid, profitable business in Virgin Money, then we would not have got this far.

“People have asked me if jobs will be affected in Norwich. What I can say is this; in all the modelling we have done we only see benefit for Norwich.”

Virgin said the acquisition of the Northern Rock and its huge customer base would help Virgin Money increase sales of its existing products including credit cards and insurance.

“We are not necessarily expecting more jobs in Norwich as a result of this, but the staff who are here are certainly going to be busy,” said a Virgin Money spokesman.

Virgin confirmed it would keep the headquarters of Northern Rock in Newcastle, and hoped to retain as many of its 6,000 staff as possible.

It also pledged to continue contributing a share of its profits to the Northern Rock Foundation, a charity founded 10 years ago when it converted from being a mutual building society.

But the takeover is not yet a done deal, as it needs the backing of Northern Rock investors who have become increasingly worried a sale of the bank would wipe out their shareholdings.

Around 100,000 of the bank's small shareholders have written to chairman Bryan Sanderson expressing fears directors were planning a “fire sale” of assets.

And Northern Rock's biggest shareholder RAB Capital has threatened to block any deal that would not deliver value for shareholders.

But the 20pc rise in Northern Rock's share price yesterday (mon) indicated the City felt the bid had a good chance of success.

If Northern Rock is not sold, it may end up being put into administration, which could leave the shareholders with nothing.

Northern Rock was forced to borrow £25bn from the Government after the summer's credit crunch left it unable to raise cash in the wholesale money markets.

The bank's savers quit the group in droves after news of its moves to call on the Bank of England to help as a lender of last resort, leading to the first run on a bank in nearly 150 years.

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