Support growing for rival Rock bid

Dec 8 2007 by Graeme Whitfield, The Journal

WEIGHT was growing behind a rival bid for Northern Rock last night after two shareholders’ groups gave it their backing.

The Olivant group headed by former Abbey chief Luqman Arnold has unveiled details of a rescue plan for the Rock based around plans to repay between £10bn and £15bn to the Bank of England immediately and the remainder by the end of 2009.

The bid would see the Northern Rock name retained and current shareholders retaining their interest in the bank through a rights issue, though there was no guarantee about the 6,000 jobs at the bank.

Last night both the Northern Rock Small Shareholders Group and the UK Shareholders Association backed the plans.

A Virgin Money consortium has been named as the Rock’s preferred bidder, but American investment group JC Flowers has announced it was dropping out of the bidding.

Robin Ashby, spokesman for the Small Shareholders Group, said “Of all the potential offers which have been described in the public domain, that from Olivant seems to align most closely with our aims.

“It is essentially an injection of leadership in the context of a shareholder-led solution. The rights issue is the more affordable and better rewarded, and the existing shareholders’ share of the business going forward is the most attractive of them.”

Roger Lawson, communications director of the UK Shareholders Association, said: “Olivant are proposing to retain the Northern Rock name, which will no doubt please many shareholders.

“In addition, as the company will remain an independent, publicly-listed entity, it is likely that the interests of other stakeholders such as the employees, the Northern Rock Foundation and others will be protected by this proposal.

“JC Flowers have announced that they are dropping out of the race, but there may be other proposals still forthcoming from other parties. However, we suggest that it may be difficult to obtain offers that are more attractive than the Olivant one so far as shareholders are concerned.”

Olivant, which is not proposing to change ownership of the bank, said it would raise between £450m and £650m by issuing new shares in the bank, after which it will pump in £150m in return for a minority stake.

Olivant’s proposal would see Mr Arnold appointed as chairman.

Mr Arnold said: “It is time for all stakeholders to work together to ensure prompt and full repayment of the Bank of England facility and to set Northern Rock back on course for a successful and independent future.

“We believe that this proposal satisfies the requirement of all stakeholders, including the tripartite authorities’ principles for assessing Northern Rock proposals, while confirming the broad and constructive support from shareholders.”

The Northern Rock brand would also be retained under the proposals, as would its presence in the North-East.

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This is not a good time for Labour but we’re united, says Health Secretary

HEALTH Secretary Alan Johnson has acknowledged it was “not a good time for the Labour Party”, but denied there was a Blairite plot to oust Prime Minister Gordon Brown.

Mr Brown’s recent difficulties over ailing bank Northern Rock, the loss of child benefit computer discs and unlawful donations to Labour have sparked reports that allies of his predecessor Tony Blair are scheming against him.

But Mr Johnson insisted Mr Brown could not have prevented the string of crises emerging and was dealing with their consequences “remarkably well“.

The Health Secretary acknowledged the row over proxy donations from North-East property developer David Abrahams was “terrible” for the party, but said he did not believe Harriet Harman had done anything wrong in accepting £5,000 from a woman acting as a conduit for Mr Abrahams to fund her bid for the deputy leadership.

He said: “I have never known the party so united behind one leader. I’ve never known such an absence of factions and cliques.

“It’s impossible to imagine a situation where your ratings will go up when a computer disc is lost with loads of bits of information on it, when we have the issue with Northern Rock, when we have this terrible issue around party funding.”