Virgin revealed its plans for Northern Rock's board yesterday after the withdrawal of Olivant from the bidding process left Sir Richard Branson's consortium as the favourite to take control of the stricken bank.
Sir Brian Pitman, former chairman of Lloyds TSB, would be executive chairman, with Jayne-Anne Ghadia, who runs Sir Richard's Virgin Money business, as chief executive. Virgin and the other three members of Sir Richard's consortium would each have non-executive representatives on the board. Virgin's representative would not be Sir Richard. Virgin would appoint six independent non-executive directors, the most senior of which would be from the North-east.
While Virgin now heads a two-horse race, the Treasury and Olivant are understood to be discussing the reasons for its abrupt withdrawal. Virgin's only competition to run the bank is currently Northern Rock's own management team. Paul Thompson, the former chief executive of the insurers Britannic and Resolution, was appointed as a non-executive director of Northern Rock last month to put together an in-house bid, and has gained support from shareholders who oppose Virgin.
The Treasury was surprised by Olivant's withdrawal from the bidding process on Monday. The investment firm, led by the former Abbey National chief executive Luqman Arnold, said the Government's demands prevented a bid from offering enough returns. One of its main complaints was that the Government's three-year guarantee for bonds issued by Northern Rock was too short.
Virgin has reduced the amount of equity it wants to put into Northern Rock from £1.5bn to £1.25bn to meet the Government's terms. The equity injection, which includes its own Virgin Money business, remains bigger than the one Olivant had proposed. Sir Brian is said to believe the buffer will be enough so that Virgin can rebuild the business by using its brand to attract retail depositors back to the bank.Reuse content