Olivant Pulls Out Of Northern Rock Bid

Richard Branson’s Virgin consortium was left as the only alternative to the existing Northern Rock board in the bidding for the ailing bank as Olivant withdrew before the Monday evening deadline.

The Luqman Arnold Olivant bid was pulled as it said that it was unable to find a proposal that would meet its investment needs as well as the terms of the Government financing and shareholders’ interests.

With Olivant out of the picture there are only two possible rescuers left: Richard Branson’s Virgin-led consortium and the bank’s own management team. Branson’s proposal includes leaving the bank as a listed company, but rebranded as Virgin Bank.

Proposed executive chairman of Virgin Bank, Sir Brian Pitman, said: “We have made a proposal that seeks to stabilise the company and rebuild it as a trusted and thriving institution under the Virgin brand with a long-term future. The proposal is a sound public-private solution for Northern Rock that will see taxpayers’ interests protected and give existing shareholders the opportunity to invest alongside and at the same subscription price as the Virgin Consortium.”

It is confident that the proposal meets all objectives as set out by the Treasury, the Bank of England and the Financial Services Authority, including a strategy to repay in full the financial package arranged by the Treasury and the Bank. In addition the consortium is planning to put £1.25bn of new capital into the struggling bank. Existing shareholders will be offered a rights issue for 4.7 new shares for every one owned.

New equity issue would need the approval of Northern Rock shareholders. Chancellor Alistair Darling is expected to announce the bid winner after a few weeks – but by 17 March at the latest, when the Government must provide the European Commission with good reason for continuing to support the bank financially