UK government to sell Northern Rock to Virgin Money in a £1 billion deal

The UK government yesterday agreed to sell nationalised mortgage lender Northern Rock plc, to Richard Branson's Virgin Money, in a deal worth upto £1 billion.

The government, which nationalised the bank in early 2008 and subsequently split the bank into two, Northern Rock plc, and Northern Rock (Asset Management), agreed to sell Northern Rock plc for £747 million ($1.2 billion), rising to as much as £1 billion in the future.

Virgin Money will pay £747 million in cash upon completion, a further £50 million payment within six months, Tier 1 notes of £150 million, and a further cash consideration of £50 million to £80 million upon a future profitable IPO or sale within the next five years.

The sale is expected to be completed on 1 January 2012.

Chancellor George Osborne said, "The sale of Northern Rock to Virgin Money is an important first step in getting the British taxpayer out of the business of owning banks.

"It represents value for money, will increase choice on the High Street for customers, and safeguards jobs in the North East."