Friday, 14 December 2007

Northern Rock dreams fading

There are only two interested parties left in the dying dreams of Northern Rock - Sir Richard Branson's Virgin Group and Olivant, the firm led by former Abbey National banker Luqman Arnold. Even that might be over optimistic as Olivant wants to bypass the formal process, which has a February deadline. It wants its executives in place by Christmas and thinks delay would further damage Northern Rock.

Olivant's interest is fading, and it was probably no coincidence that Adam Applegarth, the Rock's chief executive, was pushed out very early yesterday. His departure was an admission that Olivant is right about one thing: it is time to get real. It is also time to drop the pretence that this is an auction. Nobody has ever proposed buying Northern Rock with all its assets and all its liabilities. It has been a competition to see who could best safeguard taxpayers' money.

Solutions to Northern Rock – Olivant’s proposal is to repay £10 billion to £15 billion of the £25 billion immediately and this gap between the figures illustrates the degree of wishful thinking running through the plan. The Virgin solution - on the sketchy public details - doesn't sound much better. Its management has no experience of running a bank with a £110 billion mortgage book, and the Virgin name has made little impact on the financial services industry in 10 years of trying. When the taxpayer is on the hook for £25 billion, those facts can't be ignored.

Things actually got worse last night and The Virgin Group was stripped of its preferred bidder status in the battle for Northern Rock after rival Olivant threatened to walk away unless it was put on an equal footing with Sir Richard Branson’s company. Northern Rock agreed to the measure at a meeting with representatives of the Treasury, the Bank of England, the Financial Services Authority and the bidding consortium, which is led by Luqman Arnold, the former chief executive of Abbey. In exchange, Olivant agreed to remain in the auction until at least mid-January.

In a preclose statement yesterday, the Rock unveiled a £281 million write-down on sub-prime mortgage investments, including a £118 million hit on structured investment vehicles (SIVs) and a further £32 million from higher-risk SIV-lites. It did not change its September forecast of underlying pretax profits in 2007 of between £500 million and £540 million.

Meanwhile, Andy Kuipers, Northern Rock’s sales and marketing director, yesterday replaced chief executive Adam Applegarth with immediate effect but the move failed to comfort shareholders, who saw the bank’s stock plunge more than 13%. (source: Guardian & Timesonline) - New Bid for Northern Rock by Olivant, Northern Rock offers below value, Final bids for Northern Rock today, New player in Northern Rock bid, Virgin pushes forward in takeover, BAA must halve queueing times to avoid fines, SAB Miller to buy Royal Grolsch, BHP Billiton's offer rejected, News Corporation on taking over Dow Jones

The Controversial Sports Direct founder and Newcastle United football club owner, Mike Ashley, faces a legal threat to his attempt to acquire Les Ambassadeurs, the London casino.
Although Mr Ashley’s estimated £95 million offer is believed to be the highest bid on the table, it is understood that Las Vegas Sands, the American gaming behemoth, is claiming it had previously agreed a deal at about £75 million, and the owner of Las Vegas Sands and one of the world’s richest men (£13 billion) is threatening to sue. The reason for sueing is because Mr Sheldon Adelson was understood to be the original bidder at £75 million.

Mr Adelson is also believed to have contacted rival bidders through his lawyers, Mishcon de Reya, claiming he has a binding verbal agreement to buy Les Ambassadeurs and threatening legal action against them if they attempt to gazump him.

In the early stages of the sale process analysts were tipping Harrah’s Entertainment, another Las Vegas gaming giant and the owner of LCI, the casino’s former owner. However, Harrah’s is itself the subject of a recommended $27.8 billion (£13.9 billion) takeover by Apollo Management and TPG Capital, and the buyout firms are said to have vetoed a purchase of Les A in the light of tough trading conditions in the UK.

Las Vegas Sands is believed to view Les Ambassadeurs as a strong brand that could be rolled out as part of Mr Adelson’s ambitious expansion plans. In addition to the Venetian Resort Hotel Casino and the Sands Expo and Convention Center in Las Vegas, it runs the Venetian Macao Resort Hotel and the Sands Macao.

Las Vegas Sands declined to make any comment, while Mr Ashley could not be reached for comment. (source: Timesonline) - Alitalia SpA in sight for Air France-KLM, Sports Direct to block Nike takeover

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