Hot sectors in a tepid recovery
The energy, finance, technology and healthcare industries are expected to be the hottest areas for dealmaking in 2010. Full Article | Full Coverage
Northern Rock to name Virgin as preferred bidder
LONDON (Reuters) - Richard Branson's Virgin Group is set to be named preferred bidder to rescue ailing British bank Northern Rock NRK.L, a person familiar with the situation said on Sunday.
Northern Rock will make the announcement on Monday and the Virgin consortium will immediately repay 11 billion pounds ($22.6 billion) of the estimated 25 billion pounds the bank has borrowed from the Bank of England, the person said.
Virgin would repay the loan in full before any big payout to shareholders.
Virgin declined to comment. Northern Rock was not immediately available.
The BBC said Northern Rock's existing shareholders would retain around a third of the business under Virgin's plan.
Virgin will launch a deeply discounted share placing that would value Northern Rock shares at between 20 pence and 40 pence each if its offer is accepted, the Sunday Times newspaper said. The shares closed at 85.9p on Friday.
But shareholders could be told they need to accept a deal or risk the bank going into administration, even though an offer may not put much value on their holdings. The bank's top two investors -- hedge funds RAB Capital and SRM Global -- have urged advisers to scrap the auction.
SRM Global said shareholders should be allowed to vote on the sale of all or part of Northern Rock to prevent any bidders purchasing assets at "fire sale prices."
Northern Rock would be renamed Virgin Money under Virgin's plan.
The consortium includes U.S. insurance group AIG (AIG.N), buyout firm WL Ross, investment group Toscafund and Hong Kong- based investment group First Eastern.
GOING, GOING...
Northern Rock has been engulfed in crisis since it was unable to raise funds in financial markets and the Bank of England stepped in to offer it emergency loans in mid-September.
Northern Rock shares have continued to fall during the auction process and have plunged more than 90 percent this year to cut its market value to just 362 million pounds.
Earlier on Sunday sources said Virgin and U.S. buyout firm J.C. Flowers were the two front-runners for a deal.
Shareholders were unlikely to get much value under the rival J.C. Flowers proposal, which involved a "nominal" offer for the shares, Reuters reported earlier this week.
Other potential suitors include investment firm Olivant, backed by former Abbey National chief executive Luqman Arnold, and Cerberus, another U.S. buyout firm, in tandem with U.S. finance firm GMAC.
(Editing by Quentin Bryar and Kenneth Barry)
