ADIA backs Virgin Money for Lloyds bid

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Virgin Money lures Abu Dhabi Investment Bank to acquire 632 branches of Lloyds bank across UK high streets.

Abu Dhabi Investment Authority has been named as an investor backing Virgin Money in its bid for 632 branches of UK high street bank Lloyds TSB, according to a report.

The Emirate’s sovereign wealth fund, which has assets in excess of $600bn, could be the necessary ingredient to ensure Richard Bransons company launches a successful tender, Daily Telegraph disclosed this weekend.

According to the report, the ADIA is one of five investors backing the project, along with Carlyle, General Atlantic and the Universities Superannuation Scheme.

It is understood that Lloyds is being forced to sell its branches as a result of a European competition ruling.

Rumours of Virgin Moneys involvement surfaced after Citigroup and JP Morgan, who are conducting the sale of the Lloyds branches, said they were in contact with Virgin during the auction process.

In recent weeks, Project Verde,the group leading the deal, also presented details of Lloyds business model to Virgin’s management team.

Virgin, which is already bidding for Northern Rock, is considering to mount the second-round bid as it attempts to challenge rival high street banks.

The online bank did not to make a formal first-round bid for the branches.

The funds connected to the Abu Dhabi Emirate are one of five sets of investors backing Virgin Money following a detailed search for new financing by financial advisers, Greenhill.

Each of the five backers will take a minority stake in Virgin Money if it is successful in winning either the Northern Rock bid or the Lloyds branches bid, or both.

LLOYDS KNOT

Lloyds, which is being forced to sell the branches due to a European Union ruling over state aid, received only three formal bids in the first round of the sale process, from the Co-operative Bank, AIM-listed shell company NBNK and entrepreneur Hugh Osmond’s Sun Capital.

The low level of interest reportedly stemmed from worries over a gap of between 20 billion (AED116 billion) and 30 billion (AED174.11 billion) between the assets and liabilities of the business up for sale.

Lloyds has since indicated it will increase the asset base of the estate by 5 billion (AED29 billion) over the next two years to help ease some of the concerns.

Last week, NBNK confirmed it was in talks with National Australia Bank over the acquisition of the Clydesdale and Yorkshire banks ahead of a possible deal both for Lloyds and also Northern Rock to create a substantial new force in the UK retail bank market.

The second round of bids for the Lloyds branches closes at the end of September.

ThisLondonfinancial services company, of which 41% is owned by the British government, boasted nearly one-third of the mortgage market inBritainafter its 2008 purchase of beleaguered rival HBOS.

But the seemingly low price paid at the height of the financial debacle has proved costly because of significant losses attributed to prior practices of the acquired company.

In its ongoing retrenchment, the bank is reportedly cutting thousands of jobs, while pulling out of many countries where it does business.

Shares of Lloyds Banking Group recently had been down more than 50% this year.

A current or prospective Lloyds Banking Group shareholder must decide whether its business has now stabilized, whether it can get HBOS operations in line with its own more conservative practices and whether necessary cost-cutting will constrain future growth prospects.

The British economy and property market will be the key factors in determining resurgence the company might experience.

With a divergence of opinions, Lloyds Banking Group shares receive a consensus “hold” rating from Wall Street analysts, according toThomson Reuters. That consists of 10 “buys”, two “overweights”, eight “holds”, two “underweights” and four “sells.”

Sources: arabianbusiness, telegraph, UKPA, latimes

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