Treasury 'wants Rock bidding war'

The battle for Northern Rock looks set to intensify

Chancellor Alistair Darling has asked troubled lender Northern Rock to consider rival bids, the Financial Times reports.

A consortium led by Richard Branson's Virgin Group was named the preferred bidder by the bank last week.

The paper said the chancellor now hopes a bidding war will break out after private equity groups Cerberus and JC Flowers submitted revised offers.

The report said Mr Darling wants the bank to select a bidder by Christmas.

"Clearly it makes sense to have more than one interested party, from the taxpayer point of view and also from the standpoint of Northern Rock shareholders," the paper quoted an official close to the deal as saying.

But a treasury spokesperson said the report in the Financial Times was "inaccurate" and that there had been no real change in Northern Rock's situation.

"The government continues to keep all options open in relation to the future of Northern Rock. The government is happy to talk to any bidder that satisfies the principles it has set out," a Treasury statement later said.

Goals

The Bank of England has lent Northern Rock some £25bn of taxpayers' money after the bank was forced to seek emergency funding in the aftermath of this summer's credit crunch.

Savers' deposits were also guaranteed as the move to offer an emergency loan triggered Britain's first bank run in living memory.

According to the Financial Times, JC Flowers' bid meets the government's goals for the sale, aimed at recovering the billions loaned to the bank.

A major shareholder in Northern Rock had criticised Virgin's bid as undervaluing the beleaguered firm.

There are also doubts about whether Virgin has secured financing for its proposed deal, a separate newspaper report said.