Northern Rock has confirmed that it has chosen a consortium led by Sir Richard Branson's Virgin Group as its preferred buyer for the stricken bank.
The Northern Rock will be rebranded under the proposal.
Virgin's offer - which has been backed by the Treasury - includes an immediate repayment of £11bn out of the £25bn the bank owes the Bank of England.
One of the Rock's main investors, said it would reject the bid.
Should shareholders block the deal, then the bank could be nationalised or put into administration.
BBC business editor Robert Peston said that opposition represented "a major obstacle for Virgin and an embarrassment for the Rock board".
RAB, which owns about 6.7% of the bank, told the BBC that Virgin's offer was "cheeky" and that the value it put on Northern Rock was "too low".
Northern Rock's shares were up 29% to 110.6 pence by late afternoon trading.
They had earlier leapt more than 48% after the immediate announcement of the Virgin news.
The Newcastle-based lender hit funding difficulties in September after world credit markets dried up, and it was required to go to the Bank of England for emergency loans to cover its day-to-day funding requirements.
1 Jan Northern Rock starts the year in apparently good order
14 Sept Markets react to the news of the Bank of England's support for Northern Rock
23 Nov Northern Rock's market value stands at £362m
26 Nov Virgin values Northern Rock at £200m
The Virgin offer proposes an injection of £1.3bn of new cash into the Rock, with half of that money coming from the consortium.
The remainder would be raised through an offer to existing Rock shareholders to buy new shares for 25 pence each.
On that basis, Virgin values Northern Rock at £200m, considerably less than its current market value of £362m.
Virgin would end up with 55% of the new company, leaving current shareholders with 45%.
The new business would be rebranded Virgin Money, though it would keep its existing stock market listing.
Virgin will then repay the remaining £14bn of Treasury loans over the next three years.
The consortium has also informed the Rock that it has no current intention of making "any material reduction" in employment in Northern Rock.
It also intends to continue operating the business from Newcastle-upon-Tyne.
Northern Rock chairman Bryan Sanderson, described the proposed deal as "very good news" for the bank.
"Over the last few weeks and months we have looked at the issues from the perspective of all stakeholders," he said.
"I am grateful for the support that we have had from customers and employees who have stayed loyal to us during these difficult times - and pleased that a solution that firmly restores the company's prospects has been identified.
"Furthermore our retail depositors can be fully reassured that the government has said it will ensure savers' money is safe whatever the outcome."
Of the ten expressions of interest from financial institutions in taking control of Northern Rock, Virgin's was said to be preferable because it offered the best deal to the beleaguered lender's shareholders.
'Not be happy'
If big Rock investors, which include hedge funds RAB Capital and SRM Global, are unhappy with the terms offered by the Virgin consortium and resist the deal, it could be nationalised or be taken into administration.
Sir Richard's consortium will pay back £11bn immediately
RAB Capital's chief executive Philip Richards told the BBC before the Virgin announcement that he would vote against a proposed takeover of Northern Rock that would "wipe shareholders out or nearly wipe shareholders out".
A group representing individuals with small holdings in the bank has also said it will need to see the details of the Virgin bid before they give their support.
"If we feel that we are being entirely ripped off, ripped out, kicked out of the long term, then shareholders may not be happy to just to roll over and go along with these people who it has been reported are preferred bidders," Robin Ashby of the Northern Rock Small Shareholders Group told the BBC.
BBC business editor Robert Peston said Virgin has agreed it will only pay itself "normal" dividends from Northern Rock until all public money is repaid - thus avoiding the potential embarrassment for the Treasury of the group making spectacular profits with the help of the taxpayer-backed loan.
Yet our correspondent warned that if there was a severe housing market recession over the next two or three years, taxpayers may not get all of their £25bn back.
"However, the equity Sir Richard is putting into the business - including more than £200m of his own money - would be wiped out in those circumstances," he said.
"In other words, he could not profit from our misery, even though some will doubtless accuse the Treasury of using our money to help him make spectacular potential long-term gains."
And despite the big rise in Northern Rock's share price, some analysts cautioned that it was not yet certain whether it represented a good buy for investors.
"This stock is not for the faint hearted and the range of outcomes for shareholders is very wide," said Nic Clarke, an analyst at Charles Stanley in London.