Virgin Money lines up Ross to fund RBS deal

By LUCY FARNDON
Updated:

WILBUR ROSS

In the money: Wilbur Ross is bankrolling Sir Richard Branson's latest

Sir Richard Branson has signed up billionaire American Wilbur Ross to bankroll Virgin Money's expansion into banking - starting with a bid for Royal Bank of Scotland's bank branches.

RBS has set a deadline of tomorrow for the first round indicative bids for the 318 branches it must sell as part of European Union conditions in return for receiving a government bail-out.

Virgin Money, Spain's Santander, National Australia Bank and Spain's BBVA are all expected to put in serious proposals, sources say, with the eventual sale price likely to be around £2billion.

Virgin Money has persuaded Ross to invest at least £500million if needed to fund

the RBS offer. However it is also keen to sign up other potential investors including private equity firms. JC Flowers and Blackstone may be contenders.

Ross has also agreed to spend a further £100million to buy a 21per cent stake in Virgin Money from Branson, who currently owns 100 per cent of the business.

James Lockhart, vice chairman of WL Ross, will join the Virgin Money board. Branson is still looking for a new chairman after Sir Brian Pitman died last month. The £100million would help finance the cost of rolling out Virgin-branded high street bank branches.

 

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But Branson knows organic expansion won't be sufficient to enable Virgin to become a force on the high street. He is prepared to dilute his ownership to bring in partners to help finance acquisitions.

Virgin Money is also keen on Northern Rock's 'good bank' and branches.

However, UKFI which manages the government-owned Rock, is reluctant to enter into an early sale and wants to knock the bank into shape first.

RBS, meanwhile, is eager to sell its branches by the summer, as it has a series of other disposals to make.

The 318 branches will be sold along with the defunct Williams & Glyn's brand, so a new entrant could use the established name. They currently trade as RBS in England and Wales and NatWest in Scotland.

Acquiring the branches would give any buyer the equivalent of a 2 per cent share in consumer banking, a 5pc share in small business banking, and a 5 per cent share in mid-sized corporate banking, with more than £22billion in deposits.

 - Gordon Pell, who retired from the board of Royal Bank of Scotland this month with a £13.6million pension pot, has been controversially re-hired by the bank as deputy chairman of Coutts.

He was the last remaining senior executive from the old regime under Sir Fred Goodwin which led the bank to near-collapse through its ill-fated acquisition of ABN Amro.

While Goodwin was forced to accept a lower pension, Pell walked away with a gold-plated retirement plan worth £582,000 a year.

He only stepped down at the end of March, however it now emerges he has been signed up to work part-time at Coutts - RBS's brand for the rich and famous.

Pell, 60, will be paid £30,000 to £40,000 a year.

RBS praised his 'decades of banking experience'.

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