Virgin Group in Northern Rock bid

A consortium led by Virgin Group submitted a proposal yesterday to take over Northern Rock, a deal that would reverse the hamstrung bank in a manner similar to the way in which Sir Richard Branson turned NTL into Virgin Media.

Members of the consortium include Wilbur Ross, the US investor who specialises in buying distressed businesses, and the Toscafund Asset Management group chaired by Sir George Mathewson, former chairman of Royal Bank of Scotland. AIG Financial Products, part of the US-based insurer, and Hong Kong-based First Eastern Investments, are also in the bidding consortium.

If successful, the group proposes to rename Northern Rock as Virgin Money, in return for injecting "substantial new equity" into the lender, which last month became the first British bank in 140 years to suffer a run on deposits.

In a statement yesterday, Virgin said: "It is the consortium's intention to maintain Northern Rock's listing, to retain the business in its entirety, to add to it and to grow it in the future; rather than seeking a break-up or partial solution."

The Virgin bid is being led by Jayne-Anne Gadhia, chief executive of Virgin Money and a former managing director of mortgages at RBS.

Sir Richard said: "I and my team have pulled together a heavy-hitting consortium that we believe has not only the knowledge and expertise but the financial clout to make a once great British institution great again."

Sir Richard will not be alone in bidding for the bank, however. A number of private equity firms have also been in talks with Merrill Lynch, Northern Rock's advisers. They are believed to include Cerberus and JC Flowers.

Merrill had set a deadline of yesterday for initial negotiations, but a person familiar with the process said that several credible potential bidders had asked for an extension of that timescale into next week.