Three bids expected for Northern Rock
Feb 4 2008 by Adrian Pearson, The Journal
THREE bids for Northern Rock are expected to be submitted today.
Gordon Brown is preparing to pick the future owner of the bank – and nationalisation is still not ruled out.
By the end of today three formal offers for the bank will have been handed in to the Treasury and the Government will then begin what could be a month-long process of picking the best offer.
Bids by Sir Richard Branson’s Virgin Group, Luqman Arnold’s Olivant and an in-house team led by director Paul Thompson are all expected.
And while the Prime Minister will have the final say, the bids first have to be assessed by the Treasury, Bank of England and Financial Services Authority, and by Goldman Sachs, the Government’s financial advisers, and its legal advisers.
The bidders will also face intense interest from the British Bankers’ Association, who are understood to be worried about the unfair advantage Northern Rock may enjoy as a result of the Government’s continued support.
Newcastle Central MP Jim Cousins, who sits on the Treasury Select Committee, said the nation would soon know the bank’s fate.
He said: “The bids will have to be scrutinised by Northern Rock and the Treasury, and this may take a while. But I think that after all the scrutiny there will be a decision before the end of February.”
With more than £25bn in taxpayers’ money currently loaned to Northern Rock, the Government will be eager to see the best possible return.
If none of the bidders offer to pay off enough of the cash loaned, the Government may be forced into temporarily nationalising the bank.
Sir Richard is so far the only bidder to confirm his intention and, after a business promotion trip to China with the Prime Minister, he is thought to be the front runner. He said: “We believe we will create a very strong bank in the future and we hope to make sure the taxpayers will get all their money paid back.” While Virgin could not rule out any job losses, Sir Richard has insisted the company will do all it can to avoid redundancies.
Because of the level of Government support, finance groups have warned the bank will not be able to offer the same highly attractive mortgage offers, as these might give Northern Rock an unfair advantage – and EU competition watchdogs will be keeping an eye on the Government’s decision.
In order to keep to EU rules, the Government may insist the bank’s new owners do not borrow more money – meaning cost-cutting redundancies could be required.
The restrictions come after the Treasury circulated a set of guidance notes to interested parties calling for the Government to be given a share in any financial recovery at the group, according to a national newspaper. The Treasury said that once a preferred bidder has been chosen, it will be put to Northern Rock’s board, who will put it to shareholders.
