Bid war hopes for Rock are dashed
A FULL-BLOWN bid war for Northern Rock was ruled out yesterday as it emerged no new bidders were likely to come forward by Monday’s deadline.
It means the fight to buy the stricken bank will be a three-way tussle between Sir Richard Branson’s Virgin Group, Olivant, the investment fund led by former Abbey boss Luqman Arnold, and Northern Rock’s management.
However, private equity group JC Flowers has left a previous proposal on the table should a deal with those three fail to happen — although it will not compete in the auction. Northern Rock shares fell 2bp to 107p.
The Treasury had hoped other bidders might emerge after it endorsed a scheme devised by Goldman Sachs to convert the £26billion the Rock owes the Bank of England into bonds guaranteed by the Government.
It was believed previous bidder Cerberus took a look, along with six new contenders, but that they found the two-week deadline imposed by the Government too short to develop proposals.
Virgin and Olivant are certain to submit new bids to the Treasury on Monday, revised in the light of the bond plan.
The management team led by Bryan Sanderson was struggling to raise cash yesterday, but it was thought he was
reasonably confident of being able to make a bid before the deadline.
All three groups have been talking to Northern Rock’s biggest investors, hedge funds RAB Capital and SRM Global.
They favour the Olivant plan over Virgin’s because it will mean their holdings will be less watered down.
However, it was believed Virgin might tweak its offer to give them more advantage. The management proposal is likely
to be the least diluting of all.
Bidders will have to pay bondholders back within three years. They will pay the Government a fee for its guarantee.
The Treasury will also hold a non-voting stake in the business to profit from its recovery.
