Chancellor announces sale of Northern Rock plc
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Issued on 17 November 2011 - Treasury
The Government is selling Northern Rock plc to Virgin Money.
It represents a significant step in returning public sector stakes in
banks to the private sector. The sale is in the best interests
of the taxpayer, secures the long-term future of the company and will
increase competition in the banking sector. This is part of the
Government's wider strategy for the banking sector with safer
ring-fenced banks and more competition for customers.
The combined business of Northern Rock and Virgin Money will
establish a new competitor in the UK retail banking sector and, in
doing so, will lead to an increase in choice for high-street
customers. It will help increase diversity in the retail
banking sector as Virgin Money seeks to innovate and expand into new
The Government will receive £747 million in cash on closing
of the sale, with the potential in the future to receive over one
billion pounds in total.
The sale values the important local heritage of the company
and recognises the importance of Northern Rock to the North East
economy. Virgin Money has committed to:
- No further compulsory redundancies, beyond those already
announced, for at least three years from completion;
- Retaining and, over time, expanding the total number of
- Extending support for the Northern Rock charitable
foundation for a further year; and
- Making Newcastle the operational HQ for Virgin Money.
The decision to proceed with a sale was based on advice from
UK Financial Investments (UKFI) and their independent advisers, having
considered all bids and other relevant options.
The sale will not affect current customers of Northern Rock,
who will carry on their banking as usual. They do not need to take any
action and can continue to operate their accounts and contact Northern
Rock as they do now. There are no changes to their terms and
conditions as a result of this announcement.
The Chancellor of the Exchequer, the Rt Hon George Osborne MP
"The sale of Northern Rock to Virgin Money is an important
first step in getting the British taxpayer out of the business of
owning banks. It represents value for money; will increase
choice on the high street for customers; and safeguards jobs in the
1. On 22 February 2008, by an order made under the
Banking (Special Provisions) Act 2008, the shares of Northern Rock plc
were transferred into temporary public ownership.
2. On 1 January 2010 Northern Rock was split into
two separate entities: Northern Rock plc, a new savings and mortgage
bank authorised as a mortgage lender by the FSA; and Northern Rock
(Asset Management) plc.
3. In his Mansion House speech on 15 June 2011, the
Chancellor announced the decision to put Northern Rock plc up for
4. In line with EC state aid requirements the sale
process was conducted in an open, transparent and non-discriminatory
5. Deutsche Bank was appointed as a joint adviser to
both UKFI and Northern Rock for the sale process.
6. The Government is today announcing the sale of
Northern Rock plc to Virgin Money. The deal maximises value
for the taxpayer, who will receive £747 million in cash on closing,
plus an expected circa £50 million of cash within six months of
completion. A further £150m 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
7. The sale is expected to be completed on 1 January
2012, pending EU merger clearance and approval by the Financial
8. As part of the sale agreement, Virgin Money have
made a number of commitments, including:
- No further compulsory redundancies other than those already
announced by Northern Rock, for at least three years from completion;
and to maintaining the number of branches currently operated by
- Making Newcastle the operation headquarters for the
- Maintaining and extending support for the Northern Rock
Foundation for a further year.
9. The Government has no plans to sell Northern Rock
Asset Management. In October 2010 Northern Rock (Asset Management) plc
and Bradford & Bingley were integrated under a single holding
company, UK Asset Resolution (UKAR). UKARís has implemented a business
plan that aims to wind down the institutions in a way that maximises
taxpayer value for money and repays combined debt to the taxpayer of
10. The Governmentís investments in financial
institutions are managed at armís-length by UK Financial Investments
Ltd (UKFI). UKFIís mandate requires it to achieve value for
money for the tax payer and pay due regard to financial stability and
competition. The full range of disposal options was evaluated by UKFI
including returning Northern Rock to the mutual sector by combining
with an existing mutual or through a standalone remutualisation of the
company. Further information can be found here: http://www.ukfi.co.uk/
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