Time’s up for Northern Rock as buy-out deadline is reached

16 November 2007
JC Flowers, Virgin Group and Cerberus are just three of the prospective buyers lined up to buy out Northern Rock as the official deadline for the bids, set by the bank along with advisers; Blackstone, Citigroup and Merrill Lynch, closes today.

Management and staff of the beleaguered bank will today be waiting with baited breath to see who will decide their future but not before yet more controversy is heaped onto what has been the first run on a bank in 140 years.

While there are reportedly up to eight proposals due to be put forward, offers are anticipated to be ‘aggressively low’ with interest coming not only from the UK but from parties in Asia and continental Europe, though it is thought that some offers may be for part of the bank rather than an total buy out.

However, potential bidders for the Newcastle-based bank have demanded clarity from Chancellor Alistair Darling regarding his plans for the bank before final takeover proposals are registered. This follows the news this week that Northern Rock has borrowed a further £2bn from the Bank of England.

While the official deadline is today, further proposals are expected to trickle in over the weekend and it is thought that Northern Rock will issue a statement disclosing how the auction process is going at some point early next week. In addition, Northern Rock shareholders will also be expected to put forward their opinions over its future.

According to the sales memorandum, several options have been set out including a possible sale of the whole bank, splitting it up or selling off branches and leaving some assets and liabilities behind for an orderly run-off. However, the Bank of England may still have to provide additional financial credit line support of around £6bn until the year 2010, even if the bank is bought outright.

Since the Bank of England offered emergency funds to Northern Rock in August, shares have plummeted and remained volatile, falling nearly one percent to 133½p at this morning’s trading.

A sale for the bank is not expected until February with final completion taking several more months.

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