Approach from Northern Rock harms Lloyds share prices

01 November 2007
Lloyds TSB suffered a decline in share prices today following speculation about talks between the bank and struggling lender Northern Rock.

Interest from Lloyds was registered in the early stages, although a formal bid was never submitted. However, any intention it had to buy out Northern Rock were overshadowed by high-profile reports about interest from both Virgin media and JC Flowers.

The Government is keen for the Newcastle-based group to be bought by a bank rather than being acquired by a private equity firm, and this may reignite talks between the two firms. However, it has been suggested that jobs could be lost if the buyer is a bank as a result of staff overlaps.

According to Northern Rock’s advisors – Merrill Lynch, Citigroup and, as of today, Blackstone – talks with all prospective bidders are still “at an early stage”. Private equity company Dubai International Capital believes it could take as long as six months for a deal to be agreed. The group is part of the Virgin Media consortium.

There is also speculation that Northern Rock may sell individual divisions of the company – such as the bank branches or the savings book – rather than selling the business as a whole in order to “seek additional expressions of interest from other parties”.

“All proposals the company has received so far are preliminary in nature,” says Northern Rock.

Find out more about Lloyds TSB online banking and Northern Rock mortgages

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