Northern Rock Bidder Withdraws

by Stewart Douglas

Story link: Northern Rock Bidder Withdraws

One of the main contenders in the takeover battle to secure Northern Rock has today announced it is to drop out of the race to buy the struggling bank, as more groups are expected to place their revised bids.

The Tyne consortium, which brought together the likes of equity house Five Mile and entrepreneur Alf Gooding have announced they will no longer be competing in the takeover bid, which is currently headed by the Virgin led consortium as the favoured potential suitor.

The move follows comments from Chancellor Alistair Darling earlier in the week which suggested the British taxpayer would benefit from a bidding war, encouraging Northern Rock to consider the bids from all potential contenders.

However, it would appear that despite the Chancellor’s pleas the Tyne consortium will no longer be a contributor to any potential bidding war that may emerge for the major UK mortgage lender.

The bid is currently led by a consortium of the Virgin Group along with AIG and others, who are intending to rebrand as ‘Virgin Money’.  However it is thought that a number of other private equity firms that have previously expressed an interest in the bank are poised to lodge revised bids for the bank prior to any close-out with Virgin.

Of the remaining groups are ex-Abbey chief Luqman Arnold’s Olivant and former Goldman Sachs man Chris Flowers’ private equity firm JC Flowers, along with a further interest from US-based equity firm Cerberus.

Of most central to the bidding process is the way in which the bank is to refund its £20 billion debt to the British taxpayer, and it is thought that the pending JC Flowers bid will reflect a more flexible approaching to dealing with this problem over time.