Northern Rock Virgin on a takeover
OK, so I’m really only writing about this because of the obvious delicious pun in the headline, but lets see if we can put a bit of analysis behind this to make it worthwhile as well!
Richard Branson has his takeover head on and is sniffing around Northern Rock following it’s recent troubles.
As expected this has caused a huge increase in Northern Rock’s share prices. A friend of mine decided he was going to invest £1000 in shares last week prior to this announcement - after taking a look at the low price of Northern Rock he was tempted to put his money there but instead he decided on a safe bet instead. As of this morning he made £30 on his safe bet, but would have made over £400 investing in Northern Rock! Ouch!
So the good and bad points are as follows for potential buyers:
- Good: Low share price
- Bad: Northern Rock owes almost £13billion to the government
- Bad: The markets aren’t currently lending to Northern Rock
- Good: Built in customer bade for someone wanting to get into the wider world of banking
- Bad: Most customers have already left!
According to reports Virgin would beed private financial backing in order to bid for Northern Rock, but US potential buyers including JC Flowers and Cerberus are interested too. For those who want to see the Northern Rock Group stick together Virgin is the favoured option.
However, other private equity groups – including US firms JC Flowers and Cerberus - have been linked with Northern Rock, but Virgin would be preferred by many as it would be most likely to keep the group together – under a rebranding.
I haven’t see word yet on any confirmed takeover bids even though the deadline was supposed to be at the end of business Friday so I’ll have a stab at what we’ll see from Mr Branson. I think he has wanted to grow his Virgin Money outfit for some time now and this is a good opportunity for him - if he can secure the required funding, and it’s a big ‘if’, - I think we’ll see a bid.