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 (IRE) 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 and the European Commission. -- Written by Antoine Gara in New York.
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