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VIRGIN LOOKS FOR PARTNER TO FUND ITS ROCK BID

Virgin boss Sir Richard Branson

Thursday December 31,2009

By Andrew Johnson

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Virgin Money has opened talks with potential private equity partners as it looks to be among the first of a flood of “new entrants” into the financial sector next year as banks are broken up.

Sir Richard Branson’s company is a favourite to bid for the “good” parts of Northern Rock once the bank’s split is completed next month.

It will need capital to underwrite the business, raising the possibility it will buy the Rock as part of a joint venture, using the Virgin name with the financial muscle provided by someone else.

Virgin has also held discussions with credit-card joint venture partner Bank of America and with Middle Eastern investors, with a view to striking a deal for the Rock by May next year.

Virgin is one of a number of firms believed to be interested in snapping up parts of the Rock as well as bits of Lloyds and Royal Bank of Scotland, which are being forced to sell assets such as branches in the next four years to meet European rules on state aid.

City sources said there are currently 30 organisations applying for some form of banking licence , sparking fears of a logjam. However, the City watchdog the Financial Services Authority is currently evaluating only “two or three credible” applications for prospective banks wanting to take deposits for current and savings accounts, a figure in line with normal.

Branson’s company is one of those but is also looking to buy a small existing bank to speed up the process. Virgin is confident it will have a licence in the new year.

Other applicants are thought to include Metro Bank, a start-up from US entrepreneur Vernon Hill which has plans to open 200 branches, and a Panmure Gordon-backed venture to be run by its analyst Sandy Chen.

A number of private equity firms are thought to be interested in entering the market, such as JC Flowers, which recently appointed former FSA chairman Sir Callum McCarthy as European chairman. US private equity firms Texas Pacific Group and General Atlantic could also be interested.

Clydesdale and Yorkshire owner National Australia Bank is also interested, with City sources also naming BBVA as a possible buyer.