Bearded wonder

27 November 2007 By Hugo Dixon Follow @hugodixon

That’s the paper profit for Virgin implied by the current value of Northern Rock’s shares assuming Virgin’s takeover goes through on the proposed terms. Not bad given Virgin is only injecting £200m and its smallish Virgin Money business.

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Alistair Darling, the UK Chancellor of the Exchequer, said he welcomed Northern Rock's decision to prioritise a bid from a consortium led by Sir Richard Branson's Virgin Group, and said that talks were proceeding urgently.

Sir Richard's consortium on Monday unveiled plans to inject £650m and the Virgin Money business, valued at £250m, into Northern Rock in return for a stake of up to 55%. Shareholders would be asked to provide a further £650m through a rights issue, for which Hoare Govett has been lined up as a potential underwriter.

Sir Richard is providing £200m of the consortium's cash, with the remaining £450m provided by fellow consortium members First East Investments, Toscafund, and WL Ross & Co.

The consortium has lined up a potential funding package from Citigroup, Deutsche Bank and Royal Bank of Scotland to repay the Bank of England upfront £11bn of the roughly £24bn it has lent Northern Rock. The rest of the money will be repaid over twothree years.

Northern Rock managers could agree a deal within about three weeks, according to a person familiar with the situation, although any agreement would require approval by a shareholders' meeting.

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