US billionaire Wilbur Ross has pledged ┬ú500 million to help Virgin Money bid for the Royal Bank of ScotlandÔÇÖs branch network.
Royal Bank of Scotland (RBS) has been ordered by the European Commission to sell 318 of its branches after it received around £46 billion from the UK government following the global financial crisis.
Ross has agreed to buy 21 per cent of Sir Richard BransonÔÇÖs Virgin Money for ┬ú100 million, and has pledged a further ┬ú500 million ahead of todayÔÇÖs bid deadline for RBS. It is thought this additional sum will give Virgin Money the firepower it needs to pursue the acquisition.
Analysts have estimated that the cost of RBS's branch network could be up to £2 billion.
Ross, whose business interests include steel, oil and insurance, teamed up with Virgin in 2007 for its attempt to buy Northern Rock, which was ultimately unsuccessful.
The UK government owns an 84 per cent stake in RBS. Other possible bidders for the branches include Spanish bank Santander and National Australia Bank.
Virgin Money confirmed RossÔÇÖs investment in the company this morning, with Branson commenting: ÔÇ£I am delighted that WL Ross has decided to invest and partner in our vision for a new way of banking. Our ambition is to make everyone better off through good value and transparent products backed by a great customer experienceÔÇØ.
Wilbur L. Ross, Jr., chairman of WL Ross said: ÔÇ£We are impressed with Virgin Money's well deserved reputation with UK customers and with its growth strategy. We look forward to supplying substantial additional capital to support Virgin's acquisition program.ÔÇØ
Jayne-Anne Gadhia, chief executive of Virgin Money, added: ÔÇ£The investment from WL Ross is a significant endorsement of our banking plans and will help Virgin Money build a real banking alternative for consumers in the UK market. Virgin Money will provide an improved and differentiated form of banking to its customers, based on the core principles of fairness, simplicity and value that are synonymous with the Virgin brand.ÔÇØ
She concluded: ÔÇ£This will provide customers with real choice in an industry that has become highly consolidated in recent yearsÔÇØ.
RossÔÇÖs purchase of a 21 per cent stake has meant that Branson's shareholding in Virgin Money has fallen to 79 per cent.
If Virgin Money does not succeed in acquiring the RBS branch network, it is thought that it will still pursue other acquisitions, including the online banking arm of HboS belonging to Lloyds Banking GroupÔÇöIntelligent Finance. The remaining parts of Northern Rock are also expected to go up for sale shortly.
And even if these assets are not ultimately purchased by Virgin Money, the company still has a five-year programme to grow organically, hoping to open 70 branches over five years.
However, a successful acquisition of the RBS assets would instantly make Virgin Money the sixth-largest bank in the UK, with a five per cent share of the small and medium-sized business markets and two per cent of retail customersÔÇöwhich equates to around 1.8 million people.
