Britain will keep Northern Rock's asset management business, which holds roughly a $74 billion book of mortgages, on top of nearly $42.4 billion in capital injections that government made into the lender.
In a statement announcing the deal, Virgin chief executive Sir Richard Branson said, "Banking in the U.K. needs some fresh ideas and an injection of new competition." Virgin Money expects to re-brand Northern Rock branches and significantly bolster its lending over the next five years.
Branson is buying a lender with a still uncertain business. Northern Rock's loss narrowed to $107 million in the first six months of 2011 from a loss of $224 million in that period a year earlier. However, in 2012, Northern Rock expects to see a profit.
For Wilbur Ross led WL Ross & Co., its piece in the deal represents a further push into European bank investments. In July, the investment vehicle took a near 10% investment in
Bank or Ireland
for over $400 million as part of an investor consortium that gave the struggling Irish bank over $1.6 billion in capital.
The Northern Rock sale is expected to close in 2012 and is subject to approval by the British
Financial Services Authority
Written by Antoine Gara in New York