Virgin Money's goal of becoming a major force among Britain's high street banks has received a boost from Wilbur Ross, the Wall Street billionaire, who has promised to inject as much as £600m into the company. Mr Ross, who made his fortune reviving coal, steel and telecoms companies, is to back the organic growth plans of Sir Richard Branson's banking operation with a £100m investment in return for a 21 per cent stake.
In addition, he plans to invest about £500m in acquisitions for Virgin Money, which will include a bid to snap up the 318 branches that Royal Bank of Scotland, the state-controlled bank, has put on the market. Virgin Money is expected to throw its hat into the ring ahead of tomorrow's deadline for bids for the RBS outlets. Since receiving billions of pounds of rescue money from taxpayers, RBS has been ordered by the European Commission to offload key assets.
The purchase of RBS branches is one in a series of transactions that Virgin Money could become involved in. Lloyds Banking Group, which rescued Halifax/Bank of Scotland (HBoS), is expected to sell off sizeable chunks of its businesses, including its online banking arm Intelligent Finance, while the remaining parts of Northern Rock are set to come on to the market. Mr Ross is reported to have been one of the investors lined up to back Virgin Money's bid to acquire Northern Rock before the failed bank fell under the Government's control in 2007.
If Virgin Money does not succeed in acquiring the RBS branch network or other assets, it still has a five-year programme to grow organically. Under the terms of the cash injection, James Lockhart, a vice-chairman of Mr Ross's investment vehcile WL Ross & Co, will take a seat on the board at Virgin Money.
The investment with Sir Richard's retail banking operation is merely the latest chapter in a phenomenal career for Mr Ross, who is ranked 346th on the Forbes rich list, with an estimated fortune of $1.7bn. The 72-year-old tycoon is best known for selling the Ohio-based International Steel Group to Mittal Steel for £2.9bn in 2004, an acquisition which created the world's biggest steel producer.
Mr Ross advised Bill Clinton, the then US president, about investment strategy in Russia and also helped the mayor of New York, Rudolph Giuliani, with his privatisation policy. A Yale graduate, Mr Ross completed his MBA at Harvard Business School before joining the Rothschild bank in 1976. He quickly built a reputation as a heavy hitting bankruptcy adviser in the US. One of his longest-running cases involved cleaning up the rubble left behind by Michael Milken and his colleagues at Drexel Burnham Lambert, who had transformed the debt markets by using high-yield "junk bonds" to finance debt-laden buyouts.
By 1997, Mr Ross wanted to conduct his own deals and spent three years running a private equity fund within Rothschild. But his frustration at being shut out of deals led him to set up his own company, WL Ross & Co, in New York in 2000, using $440m of investors' money.Reuse content