The sale is in the best interests of the taxpayer, secures the long-term future of the company and will increase competition in the banking sector.
This is part of the Government's wider strategy for the banking sector with safer ring-fenced banks and more competition for customers.
The combined business of Northern Rock and Virgin Money will establish a new competitor in the UK retail banking sector and, in doing so, will lead to an increase in choice for high-street customers.
It will help increase diversity in the retail banking sector as Virgin Money seeks to innovate and expand into new market segments.
The Government will receive £747 million in cash on closing of the sale, with the potential in the future to receive over one billion pounds in total.
The sale values the important local heritage of the company and recognises the importance of Northern Rock to the North East economy.
Virgin Money has committed to:
- No further compulsory redundancies, beyond those already announced, for at least three years from completion;
- Retaining and, over time, expanding the total number of branches;
- Extending support for the Northern Rock charitable foundation for a further year; and
- Making Newcastle the operational HQ for Virgin Money.
The decision to proceed with a sale was based on advice from UK Financial Investments and their independent advisers, having considered all bids and other relevant options.
The sale will not affect current customers of Northern Rock, who will carry on their banking 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.
The Chancellor of the Exchequer, the Rt Hon George Osborne MP said:
"The sale of Northern Rock to Virgin Money is an important first step in getting the British taxpayer out of the business of owning banks.
"It represents value for money; will increase choice on the high street for customers; and safeguards jobs in the North East."
Ron Sandler, Executive Chairman of Northern Rock plc said:
“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.”
Sir Richard Branson, Founder of the Virgin Group, said:
"Banking in the UK needs some fresh ideas and an injection of new competition. I'm delighted we will get the chance to work with the loyal staff of Northern Rock to create a new force in the market.
"Virgin has a history of entering new sectors to improve service and provide value for customers. We plan to do the same in banking."
