Branson tipped to snatch Northern Rock

Richard Branson head shotNorthern Rock has been moored to the government long enough. Both Virgin Money and NBNK Investments are now offering serious bids for it. Part of the selection criteria inevitably has to be jobs: imagine the embarrassment to the government were the new owner to start suddenly firing P45s in all directions. Yet it's not much of a race - just two horses - and the taxpayer isn't coming out of it ahead either.


Taxpayers' loss

Both bidders are likely to tell the government they will retain most of the 2,000-strong staff. US private equity company JC Flowers has also expressed interest in the sale, but will likely cry off. Both bidders, Virgin and NBNK, are likely to offer around £1bn.

The government has pumped in around £1.4bn of taxpayers' money. The bank collapsed in 2007 following super-aggressive lending practices and consequently split in two with a "good bank" hanging onto the Northern Rock mortgage portfolio and savings, while the "bad bank" - Northern Rock Asset Managment - has shown recent signs of recovery.

No guarantees

Who's fave? Virgin just pips NBNK. Stronger branding and the possibility that Branson would make an effort to challenge the established players. However, Virgin Money hasn't made quite the impact in financial services it originally promised. And the Virgin name, despite some huge successes, does not guarantee brand gold: anyone remember Virgin Cola or Virgin Vodka?

But Northern Rock's 70-odd branches would scale, more or less, with Virgin's bricks and mortar high street ambitions. Branson will be backed by Chinese money. Around half of the £500m is expected to come from US tycoon Wilbur Ross with the other half bil' from China Investment Corporation, which has very deep pockets. What, no cash coming from the big man himself?
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