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Branson's not the only white knight

This article is more than 16 years old

The decision to grant preferred bidder status for Northern Rock to Sir Richard Branson is baffling, as is the commitment to reimburse his expenses - £5m so far - when there are other offers on the table.

The move stemmed the flow of savings out of the Rock, but Virgin's bid is not self-evidently the best. It offers a lower upfront repayment to the Bank of England than a rival proposal from US private equity firm JC Flowers, and appears less robustly funded. Virgin's consortium looks impressive, but it is interesting that US giant AIG is merely providing credit insurance, despite the earlier impression that it would be a financial backer.

And is Branson really such a perfect white knight? His empire is opaque and his track record patchy; mobile phones were a success, but his foray into trains was troubled for a long time and the Virgin Media takeover of NTL is messy. He is relying on the heft of his Virgin Money brand to draw in customers. That looks a stretch against the likes of Nationwide and HBOS, particularly since his obligation to repay the Bank will limit his ability to compete aggressively on rates.

JC Flowers has wrested an audience from a reluctant Treasury, by dint of giving more detail on its proposals. But why was the government so hasty in its embrace of Branson. Surely it couldn't be as simple as his perceived voter appeal? Let's hope political expediency is playing no part here. Chancellor Alistair Darling should focus on selecting the owner with the best chance of a successful rescue. He owes it to taxpayers to give all the bidders a fair hearing.

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