Northern Rock tumbles on below-value bids
Northern Rock fell dramatically today after it was revealed that bids placed so far are below its market value. At the close in London, the shares were down 21% at 104p.
Up to ten bids are believed to have been made for the troubled lender on Friday. Richard Branson’s Virgin Group and private investment firm Olivant both confirmed their interest, whilst others including hedge fund manager JC Flowers and private equity firm Cerberus are also understood to have submitted proposals.
Northern Rock announced that it expected to receive further bids over the next few days, but added there was ‘no certainty’ that discussions would lead to any offer for all or part of the business. So far all proposals have involved splitting up the business.
The latest from the Government
In a separate statement, Alistair Darling published a range of criteria that will be used to determine whether to back any proposal to takeover the stricken bank having stated that the government is open “to any measure” that might end the saga. These boiled down to:
- ensuring the bank’s debt to the government is repaid
- maintaining wider financial stability, and
- safeguarding depositors
So far the government appears to have been prioritising the third of these objectives - the Rock has been lent around £24bn of taxpayers’ money so far in order to keep afloat since it first ran into credit troubles back in September.
What shareholders are saying
According to the BBC, hedge funds RAB Capital and SPM Global, who own a total of 13% of the bank’s stock, have expressed concern about a quick, forced sale or break-up of Northern Rock. They fear that the bank will be sold “on the cheap”.
