NORTHERN Rock is to be sold to Sir Richard Branson’s Virgin Money for £747m, the Treasury announced today.
The takeover of the Newcastle-based bank, which was taken into public ownership in February 2008, is expected to be completed by the end of this year.
The Government will receive an initial £747m with the potential to secure £1bn in total - less than the estimated £1.4bn it has injected into the bank during its period of public ownership.
Virgin Money failed in a bid to buy the bank following its collapse in late 2007.
Virgin said the bank’s headquarters will be based in Newcastle and it has also committed to no further compulsory redundancies beyond those already announced by Northern Rock, for at least three years
It also said the total number of Northern Rock branches will stay the same, with potentially more opened further down the line.
But it means the end of the Northern Rock name on the high street as the whole group will be branded Virgin Money once the sale is completed.
The addition of Northern Rock to Virgin Money will create a group with more than four million customers and a nationwide network of branches.
The combined business will provide savings, mortgages, current accounts and credit cards, as well as insurance and investment products.
Virgin Money will also extend the existing agreement to keep the Northern Rock Foundation going to the end of 2013, “to allow time to agree how the organisations will work together in future”.
Northern Rock was taken into temporary public ownership in February 2008 but one of the key conditions was that it would eventually be returned to the private sector.
A statement said: “For customers, it is business as usual. They do not need to take any action and can continue to operate their accounts and contact Northern Rock as they do now. There are no changes to their terms and conditions as a result of this announcement.”
Northern Rock PLC executive chairman Ron Sandler added: “The return of Northern Rock to the private sector has always been one of our key objectives.
“We said that this would be done at the right time and when there was a proposition in the best interests of taxpayers and other stakeholders.
“I am delighted that we have reached an agreement with Virgin Money which successfully delivers that.
“It is a very positive outcome for the company following a significant restructuring process. In addition to delivering value for taxpayers, it brings good news for colleagues, customers, jobs in the North East and the Northern Rock Foundation.
“Today’s announcement demonstrates the enormous progress that has been made at Northern Rock, which is great testimony to the commitment and spirit of the people who work here.
“These are qualities that can be carried forward into the new business and help ensure a strong player will emerge to enhance competition and customer choice in high street banking.”