Nationalisation of Northern Rock - Sale To Virgin Money

Sale To Virgin Money

During 2011 the government encouraged another round of bidding for the bank. By the first round deadline on 28 July Virgin Money and JC Flowers put forward their expressions of interest. In late October Virgin Money submitted their 2nd round bid for the bank. The following day NBNK rejoined the bidding process for the bank, leaving only NBNK and Virgin as contenders. This came as the restriction on NBNK from Hoffman's appointment expired; at this time NBNK were also preparing a bid for 632 branches of Lloyds. On 17 November 2011 it was announced that Virgin Money Holdings (UK) Limited were going to buy Northern Rock from UKFI for £747 million up front and other potential payments of up to £280 million over the next few years. These additional payments which would take the value of the sale to over £1 billion could include a £150 million capital instrument and an additional cash consideration of £50-80 million would be paid upon a future profitable IPO or sale in the next five years. A £73 million deferred consideration was paid by Virgin by July 2012.

The sale went through on 1 January 2012. The government said it had no plans to sell Northern Rock (Asset Management). There will be no further job losses for at least three years, except for the ones already announced previously. Virgin have also pledged to keep the headquarters of the new Virgin Money bank (savings and mortgages) in Newcastle upon Tyne. The deal is pending regulatory and EU merger approval, and the combined business will operate under the Virgin Money brand.

The deal with Virgin included jobs for 2,100 employees, around a million of Northern Rock's customers, 75 branches and around a £14bn mortgage book and a £16bn retail deposit book. Although the deal means that the British government are to loose hundreds of millions on the deal, they claim that this represented the best deal for the taxpayer. The purchase was funded by the Virgin Group and WL Ross & Co., and Virgin hope that the new enlarged Virgin Money with its 4 million customers will be "a significant new competitor in UK retail banking". WL Ross has a 44% stake in the enlarged Virgin Money - this is larger than his stake in Virgin Money after their purchase of Church House Trust in 2010.

The deals with the Northern Rock Foundation will be extended to at least 2013, giving Virgin and the Foundation time to agree how they will work together. The new Virgin Money also aims lend £45bn in total to support its customers over the next five years. The enlarged Virgin Money is led by Sir David Clementi, as Chairman, and Jayne-Anne Gadhia, as Chief Executive Officer.

The National Audit Office are to investigate the sale of the bank to Virgin.

As of October 2012 the company operates under the Virgin Money brand. On 12 October 2012 Northern Rock plc was renamed Virgin Money plc, and Virgin Money Limited was renamed Northern Rock Limited. The Northern Rock website became a redirect to Virgin Money's website.