Northern Rock Potential Takeover Deal

Troubled UK lender Northern Rock has today received a much needed boost with the prospect of a takeover bid from a high profile US private equity group, which has helped ease the sentiments of shareholders after a rocky few months for the major UK bank.

Share values on the London exchange were up by around 12% after reports of a prospective takeover bid from equity group JC Flowers for around £15bn, which is apparently ready to be invested in a takeover of the company.

The bid would be made for the company as a whole entity, rather than driving a division within the group as had previously been anticipated in order to accommodate a more suitable rescue package.

Northern Rock had been concerned that any proposed takeover move, which seemed incredibly likely as a result of the significant devaluation in shares against the remaining strong asset base, would see employees lose out through restructuring and streamlining.

However the proposal made by the JC Flowers fund would look as far as possible to keep the company as a whole with its current staff base still in tact – in other words only the owners would change.

JC Flowers are now investigating the Northern Rock accounts to determine the financial viability of any move in more depth, although it looks likely that some formal offer will soon be made for the lender.

Northern Rock have suffered several weeks in the media spotlight as a result of their emergency plea for liquidity following over-exposure to the sub-prime collapse. The resulting run on the bank, the first for around 150 years in the UK, saw consumers lifting billions in savings for fear of losing out if the bank went under.

It remains to be seen whether the takeover will go ahead, and indeed whether it will be sufficient to restore business and consumer confidence in Northern Rock.

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