Alistair Darling formally announced at 4.30pm on Sunday that Northern Rock will be nationalised - or “taken into temporary public ownership,” as the chancellor put it. Ron Sandler will head up to Newcastle to become the bank’s new chief executive, emergency legislation will be put before the Commons and, first thing on Monday, shares in Rock will be suspended.
Bids from Sir Richard Branson’s Virgin Money and a Rock management team led by Paul Thompson have been rejected.
So far, so inevitable. Thompson’s offer was a johnny-cum-lately affair with unclear financing; on the Branson side the prospect of Virgin’s 25p-a-share offer being blocked by hedge funds SRM and RAB Capital made government acceptance all but impossible.
But what we don’t know yet is what compensation the government is going to offer shareholders.
An independent assessor will now decide.
SRM’s Jon Wood has already stated that he thinks the government is open to legal action unless it pays a full price - Wood’s argument being that the Treasury has effectively acted as a shadow director. But then against a market price of 90p on Friday, this prop trader-turned-hedge manager seems to think a fair price would be 400p-a-share or #1.7bn.
Which is silly.
FT Alphaville’s uneducated bet - 100p.
(Hat tip to reader AM for the header.)
