Virgin Money acquires Northern Rock
17 November 2011
Virgin Money has today agreed to buy Northern Rock plc from Her Majesty’s Treasury, subject to regulatory and EU merger approval. Completion of the transaction is expected on 1 January 2012.
Combined with Virgin Money’s existing business of three million customers, the enlarged Group will have four million customers, will be strongly capitalised and will be highly liquid. Sir David Clementi will be Chairman of the combined business and Jayne-Anne Gadhia will be its Chief Executive Officer. The combined business will operate under the Virgin Money brand.
The acquisition, upon completion, includes:
- 75 Northern Rock branches
- One million customers
- c.£14bn mortgage book
- c.£16bn retail deposit book
- c.2,100 employees.
The acquisition is funded by an investment consortium led by Virgin Group and WL Ross & Co.
The transaction will create a significant new competitor in UK retail banking and is:
- Good for taxpayers: the Government will receive £747 million in cash on closing of the sale, plus an expected circa £50 million of cash within six months of completion. A further £150 million will be paid in the form of a capital instrument and an additional cash consideration of £50-80 million 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 £1 billion pounds in total.
- Good for jobs: the business is committed to future growth and so there will be no compulsory redundancies, beyond those already announced by Northern Rock plc, for at least three years from completion. The transaction has no impact on Virgin Money’s existing operations.
- Good for financial stability: the combined business will have a minimum 15% Tier 1 capital ratio and will be fully Basel III and ICB compliant from completion of the transaction. This compares favourably with major high street banks and building societies.
- Good for Northern Rock customers: the total number of Northern Rock branches will be retained, and in due course extended as the business’ growth allows. The combined business will aim to lend £45bn in total to support its customers over the next five years.
- Good for competition: the combined business will compete strongly in the UK retail savings and mortgage markets – launching current accounts in 2013 and, in due course, lending to small businesses.
- Good for the North East of England: the operational headquarters of Virgin Money will be based in Newcastle.
- Good for the Northern Rock Foundation: upon completion, Northern Rock’s current commitment to the Foundation will be extended immediately, in respect of Northern Rock’s existing business, to the end of 2013. This gives Virgin Money and the Northern Rock Foundation time to agree how they will work together after that.
Jayne-Anne Gadhia, Chief Executive Officer at Virgin Money, commented: “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 4 million 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”.
For more information:
Scott Mowbray, Head of Media & External Affairs, Virgin Money
+44 (0) 7834 843 384 / firstname.lastname@example.org
John Waples, FTI Consulting, PR for Virgin Money
+44 (0) 7717 814 520 / email@example.com
About Virgin Money
- Virgin Money was established in 1995 as a joint venture between the Virgin Group and Norwich Union.
- In 1997, Virgin Direct Personal Financial Services Limited launched The Virgin One Account, a joint venture with The Royal Bank of Scotland that offered the UK’s first current account mortgage direct to the retail market. In 2001, RBS bought out the Virgin Group’s stake in the joint venture.
- Virgin Money currently has over 3 million customers and offers Payment Cards (Credit Cards & Prepaid Cards), Savings and Investment products (Stakeholder Pensions, Children’s Pensions, Employers Pensions, FTSE Tracker ISA, Bond & Gilt ISA, Climate Change ISA, Cash ISA, and Unit Trusts), General Insurance products (Motor, Home, Travel, and Pet) and Life Assurance products to the UK market. To apply go to virginmoney.com.
- Virgin Money’s business ambition is to make “everyone better off” – this philosophy underpins our approach to business by offering good value to customers, treating employees well, making a positive contribution to society and delivering a profit to shareholders.
- Virgin is the official sponsor of the London Marathon, the biggest annual fundraising event in the world. Virgin Money leads the London Marathon sponsorship with the ambition to help runners raise £¼ billion over 5 years and will use its infrastructure, online capability and financial expertise to deliver that through Virgin Money Giving.