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Equity firm eyes Northern Rock

26/10/2007

A US private equity firm has confirmed that it is interested in beleaguered lender Northern Rock.

In a statement JC Flowers formally declared its interest in buying the Newcastle-based bank, acknowledging that it was in "continuing discussions" with the takeover target's board in respect of a possible offer.

Analysts say a bidding war could now break out over Northern Rock, with Sir Richard Branson's Virgin group having already confirmed that it is part of consortium that is planning to launch a rescue bid for the troubled company.

Under plans being considered by the consortium, which includes AIG and American and Far East investors, Northern Rock would be rebranded under the Virgin Money name.

But JC Flowers, which has previously been tipped as a potential suitor for Northern Rock, has gathered an impressive team of successful UK entrepreneurs to back its own interest in the bank.

In the event of a JC Flowers offer being accepted by Northern Rock, former Marks and Spencer chairman Paul Myners would be appointed as the bank's chairman.

Halfords chairman and former Alliance and Leicester chief executive Richard Pym and the former chief financial officer of Dutch bank ABN Amro, Hugh Scott-Barrett, are also among those who would be appointed to run Northern Rock under a successful JC Flowers takeover.

But JC Flowers, which is being advised by Credit Suisse and JP Morgan Cazenove, has stressed that its statement does not represent a firm intention to make an offer for Northern Rock.

"Accordingly there can be no certainty that a proposal will be forthcoming, nor that it will result in any transaction or offer," the private equity firm said.

Earlier this month Northern Rock confirmed that it was in talks with "a number" of potential suitors, but that discussions were at a "very early stage".

The company has been at the centre of takeover speculation since its brand name was compromised by the damaging run on the bank which took place last month.

In the first run on a British bank in almost 150 years, Northern Rock customers rushed to withdraw their savings after it emerged that the lender had requested emergency funding from the Bank of England due to liquidity problems resulting from the current global credit crunch.