US billionaire bankrolls Virgin Money expansion

Richard Branson

Virgin Money's goal of becoming a major force among Britain's high street banks has received a boost from Wall St billionaire Wilbur Ross, who has promised to inject up to £600 million ($1299 million) into the company.

Ross, who made his fortune reviving coal, steel and telecoms companies, is to back the organic growth plans of Sir Richard Branson's banking operation with a £100 million investment in return for a 21 per cent stake.

He also plans to invest about £500 million in acquisitions for Virgin Money, which will include a bid for the 318 branches that Royal Bank of Scotland, the state-controlled bank, has put on the market. Virgin Money is expected to throw its hat into the ring before tomorrow's deadline for bids for the RBS outlets.

Since receiving billions of pounds of rescue money from taxpayers, RBS has been ordered by the European Commission to offload key assets.

The purchase of RBS branches is one in a series of transactions Virgin Money could become involved in.

Lloyds Banking Group, which rescued Halifax/Bank of Scotland (HBoS), is expected to sell off sizeable chunks of its businesses, including its online banking arm Intelligent Finance, while the remaining parts of Northern Rock are set to come on to the market.

Ross is reportedly one of the investors lined up to back Virgin Money's bid to acquire Northern Rock before the failed bank fell under the Government's control in 2007.

If Virgin Money does not succeed in acquiring the RBS branch network or other assets, it still has a five-year programme to grow organically.

Under the terms of the cash injection, James Lockhart, a vice-chairman of Ross' investment vehicle WL Ross & Co, will take a seat on the Virgin Money board.

The investment with Branson's retail banking operation is merely the latest chapter in a phenomenal career for 72-year-old Ross, ranked 346th on the Forbes rich list, with an estimated fortune of US$1.7 billion.

He is best known for selling the Ohio-based International Steel Group to Mittal Steel for £2.9 billion in 2004, an acquisition that created the world's biggest steel producer.

Ross advised Bill Clinton, then US President, about investment strategy in Russia and also helped the mayor of New York, Rudolph Giuliani, with his privatisation policy.

The Yale graduate completed his MBA at Harvard Business School before joining the Rothschild bank in 1976. He quickly built a reputation as a heavy-hitting bankruptcy adviser.

One of his longest-running cases involved cleaning up after Michael Milken and his colleagues at Drexel Burnham Lambert, who had transformed the debt markets by using high-yield "junk bonds" to finance debt-laden buyouts.

Ross set up his own company in 2000.

- INDEPENDENT