Nationalisation of Northern Rock favoured over Branson's bid

by Catherine Woods - Monday, 18th February 2008 -

Richard Branson has lost the battle for Northern Rock with the government electing to nationalise the bank instead.

Nationalisation was originally panned as an idea by many commentators (including yours truly), but with the absence of a bid that the government deemed as providing good value for the taxpayer, Gordon Brown and Alistair Darling have brought the lender under state control.

Ron Sandler – the much-feted saviour of the Lloyd's of London insurance market – has been installed as executive chairman of the bank for the interim while Ann Godbehere has been appointed CFO. Godbehere, a Canadian, is the former CFO of insurer Swiss Re and made it onto Fortune’s list of the 50 most powerful women in 2006.

Sandler will be paid a flat rate of £90,000 per month while Godbehere will be paid £75,000 per month. “No additional incentives will be discussed until the new board has discussed its business strategy with the government,” the government noted.

Of the Virgin proposal, the government said: “[It] would have brought a new brand and management. However, the taxpayer would only have seen any share of the private sector's return if the value of the business to its investors had reached at least £2.7bn.”

Branson has expressed his disappointment at the decision. In the Independent, he is quoted as saying: "All of us in the Virgin consortium are very disappointed that the government has chosen to opt for nationalisation.

"We were very clear the business plan we put forward was robust, conservative but ultimately capable of rescuing the interests of all stakeholders."

Picture source

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