An American billionaire is to inject new life into a vehicle set up to acquire British banking assets, paving the way for fresh efforts to create a major new high street lender.
I can reveal that Wilbur Ross, who is reported to have a personal fortune of more than $2bn, is to acquire a large stake in NBNK Investments, a London-listed cash shell established in 2010.
NBNK, which is chaired by Lord Levene, the City veteran, had tried to buy hundreds of branches from Lloyds Banking Group (LSE: LLOY.L - news) and National Australia Bank, as well as tabling a bid for Northern Rock last year.
The appearance of Mr Ross, who has amassed his fortune from industries including banking and shipping, on NBNK’s investor register could transform the prospects for the creation of a powerful new high street banking player.
Mr Ross, who is 75, became the second-largest shareholder in Virgin Money – behind Sir Richard Branson's Virgin Group – in 2010. Virgin’s subsequent takeover of Northern Rock in an auction in which it beat NBNK to the taxpayer-owned bank was part-funded by the billionaire investor.
Insiders say Mr Ross will pay about £10m for a stake of up to 30 per cent in NBNK. It would be structured as a tender offer, allowing existing investors the opportunity to sell their shares if they wish to.
Mr Ross, who will become NBNK's chairman, is expected to broaden the firm's mandate to explore potential acquisitions in Europe (Chicago Options: ^REURUSD - news) . Banks in a number of troubled Eurozone countries are being forced to shed assets to strengthen their balance sheets, presenting specialist investors in distressed businesses such as Mr Ross with attractive opportunities.
The cash injection into NBNK is to be made by Mr Ross's main vehicle, WL Ross & Co, according to investors who have been briefed on the deal. It could be announced as soon as today.
Many of the vehicle's current shareholders, which include Aviva Investors and BlackRock (NYSE: BLK - news) , are understood to have backed the move and will retain their stakes. A draft prospectus has been circulating among investors during the last few days.
Mr Ross's emergence as a backer of NBNK means that Virgin Money could opt to reverse into the listed shell if it decides to pursue a stock market listing in the coming years.
British taxpayers will net a windfall of tens of millions of pounds if Virgin Money floats within five years of its takeover of Northern Rock. A new payment to the taxpayer would mitigate some of the criticism levelled at the Government over the price it received from the sale.
Lloyds agreed to sell 632 branches to the Co-operative Group earlier this year, but sources said that NBNK could renew a push to buy these if that deal fell through.
WL Ross is backed by Invesco (NYSE: IVZ - news) , a huge fund management group whose UK arm is already a major shareholder in NBNK. Regulators are understood to have ruled that the two investors are acting in concert but that it can be approved under what are known as 'whitewash' rules by the Takeover Panel, the City's mergers watchdog.
NBNK declined to comment.