Virgin Money says �747m Northern Rock deal will not affect existing operations
Virgin Money’s �747m deal to buy the nationalised Northern Rock bank from the Treasury, will have no impact on its existing operations - which include bases in Norwich and Chelmsford, it said today.
“Banking in the UK needs some fresh ideas and an injection of new competition. I’m delighted we will get the chance to work with the loyal staff of Northern Rock to create a new force in the market. Virgin has a history of entering new sectors to improve service and provide value for customers. We plan to do the same in banking.
Chancellor George Osborne announced the sale this morning, which is expected to go through on January 1 subject to regulatory and EU approval.
Virgin Money has long been keen to get a foot in the door of the high street and the agreement will see Virgin take on the Rock’s 75 existing branches, 2,100 staff as well as its �14bn mortgage book, and �16bn retail deposit book.
Funded by investment consortium led by Virgin Group and WL Ross & Co, the enlarged group, which will operate under the Virgin Money brand, will have 4m customers.
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It will also be based in Newcastle - but Virgin said the transaction will have no impact on its existing operations, which includes Norwich.
Sir Richard Branson founder of Virgin Money, which is to buy Northern RockSir David Clementi will be chairman of the combined business and Jayne-Anne Gadhia will be its chief executive officer.
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Mr Osborne said the sale was good for taxpayers and would create a “powerful new presence” in the banking sector offering better deals and real competition.
“It was clear to us this was the best deal on the table,” Mr Osborne said.
The deal will see a further �50m paid six months after completion, while a further �150m will be paid in the form of a capital instrument and an additional cash consideration of �50-80m will be paid upon a future profitable IPO or sale in the next five years. This means the taxpayer has the potential to receive over �1bn pounds in total, Virgin said.
The group also said that because the business was committed to future growth there will be no compulsory redundancies in the next three years beyond those already set out by Northern Rock.
The combined business will aim to lend �45bn in total to support its customers over the next five years.
?Jayne-Anne Gadhia, Virgin Money chief executive, said: “We plan to create a major new competitor in UK retail banking as we bring together Northern Rock and Virgin Money at the beginning of 2012. The two businesses complement each other well and together they will create a strong bank with over 4m customers. It is the outstanding fit between the two businesses that will allow us to create a strong, stable, growing and profitable business for the future. We are aiming to build a true banking alternative for the UK consumer, one centred around our ambition to make everyone better off”.
Sir David Clementi, Chairman of Virgin Money said: “Returning Northern Rock to private ownership is an important step in rebuilding the UK banking sector, as well as an outstanding opportunity to enhance competition and financial stability whilst protecting jobs and the economy in the North East of England. It is our intention to build a significant banking competitor in the UK and to take that business to the public markets within five years through an IPO”.
Sir Richard Branson, Founder of the Virgin Group said: “Banking in the UK needs some fresh ideas and an injection of new competition. I’m delighted we will get the chance to work with the loyal staff of Northern Rock to create a new force in the market. Virgin has a history of entering new sectors to improve service and provide value for customers. We plan to do the same in banking”.
Wilbur Ross, CEO and chairman of WL Ross & Co. LLC, said: “We are pleased to be the lead partner with Virgin Group in the investment consortium that has agreed to buy Northern Rock. Virgin Money and Northern Rock together are an excellent fit, and they will be able to make a real difference to banking in the UK by offering high quality service and a full range of fairly priced products”.