Northern Rock NationalisationEssay Preview: Northern Rock NationalisationReport this essayNorthern Rock NationalisationDue to the credit crunch in 2008, a total of £1.4billion of taxpayer money was spent by the Government into the company Northern Rock in order to save the struggling bank. Following this nationalisation, the bank was then split into two on the 1st of January 2010. One half was named as the bank Northern Rock plc which was the good part of the bank for savings and mortgages. Bidders for Northern Rock would land a company with about £19 billion in retail savings and some £10 billion in residential mortgages. (Williams, 2010) This part was to be sold to a private investor whereas the second half of the bank was to remain in public ownership. The second part, seen as the bad half of Northern Rock, contains the more toxic loans and was renamed Northern Rock Asset Management with around £50billion in mortgages (90% of these not in arrears) and £.4.5billion in unsecured loans. (Williams, 2010)
Who are the Investors?After much speculation and rumoured bids from various sources such as Yorkshire Building Society and NBNK, on November 11th 2011 it was finalised that Virgin boss Richard Branson would purchase Northern Rock plc. The deal would consist of £747 million cash and £150 million in convertible debt with Virgin Money Investing £50 million, a similar sum from Stanhope Investments and £260 million from Wilbur Ross. A further sum of up to £130m will be payable to the government depending on performance and the timing of any resale of the business. (Jenkins and Pickard, 2011). On top of these figures Virgin extracted a total of £400 million of investment money from Northern Rocks and its own capital excess. The merger of these two banking groups combines Virgin Moneys 3 million members to Northern Rocks 1 million savers and borrowers along with the 75 high street branches it would take over.
The merger of these two banking groups combine Virgin Moneys 3 million members to Northern Rocks 1 million savers and borrowers along with the 75 high street branches it would take over. The merger of these two banking groups combines Virgin Moneys 3 million members to Northern Rocks 1 million savers and borrowers along with the 75 high street branches it would take over. This makes it possible for Virgin Money to sell Northern Rock shares if the new CEO is elected and a large majority of the board is left to decide whether to re-invest or not if the combined group acquires Virgin Moneys 3M in May 2010.
In a note to its shareholders, the company said: “In view of the high levels of speculation, potential and potential negative comments about our capital stock price to these investors, they have been advised that the opportunity for such a transaction could be greater than what was offered in 2013.
“It is my sincere and sincere opinion that a full and fair review of all the available discussions about the financial and regulatory changes we have to address as a result of this merger in relation to the Northern Rock merger would be appropriate at this stage (the ‘Review Act’)”.
In a follow-up statement from Virgin Media, it said: “Northern Rock and the Australian Securities Exchange Board are committed to providing an independent review of the transaction. As an investor in an entity that engages in transactions to sell shares (or to engage in a transfer). We remain committed to keeping our current strategies in place where in the future we would find suitable options for an appropriate transaction for both Northern Rock and NBNK. The merger of Northern Rock and NBNK is therefore subject to the review of the review and we will take no action to influence or interfere with that review in any way including, without limitation, with any other shareholder. The board is aware that further information will be received from the Australian Securities Exchange over a period of time regarding the merger, but it is also aware that this will not necessarily be reflected in the results of the Review and is currently not advised of any ongoing issues of interest to shareholders. The Board will hold its own independent review of the merger and will be making available until a final decision has been made on the matter. It believes that the financial outcomes of the three companies and Northern Rock will be beneficial or neutral in the short term as they have been and will continue to be subject to the review of and approval by the Australian Securities Exchange Board. The transaction will be subject to review by three third parties involved in the transaction and the boards unanimously believe that an outcome of such an independent review is in the best interests of all parties involved and the merger has not been done to its detriment.
3. Northern Rock (Australia)
4. Westpac Holdings (NZ).
5. South Australian Power (Australia).
A draft of the merger report
6. The merger is completed
7. The Northern Rock merger report
8. The merger was completed in mid-2011 after several rounds of enquiry.
The company’s statement (PDF)
To our directors, shareholders and directors
9. Northern Rock, CEO: Richard Branson’s contribution to this merger, and his reaction “Mr Branson… we must be careful as to what our future can be”. A public statement is available under the heading “Whole story”. The merger
10. No further statement of the business, or of anyone and the reasons why this transaction was not executed and it is not under review or could not be achieved in this way
Wilbur RossBillionaire Wilbur Ross, who is investing £260 million into the takeover deal, may have big plans in the future for the newly merged company but back in America he is known as a vulture investor. This is because he is very well known for investing in struggling companies; he recently invested in The Royal Bank of Ireland putting in a 33% stake among other investors to stop the bank from falling into full state ownership (Pickard, 2011). Upon completion of the takeover he became the new co-owner with a 44% stake of the merged Northern Rock and Virgin Money. He already had a 21% stake in Virgin Money from a previous £100 million investment. If he can turn around the banks like his future plans aim to, then more services including internet banking will be introduced theoretically creating more jobs for the public.