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Wilting Flowers running scared?

Posted in General, Mel Varley, Latest reporters' blogs December 7th, 2007 by Melinda Varley

This week we saw the shock resignation from the Virgin Money account by Rainey Kelly Campbell Roalfe/Y&R due to a potential client conflict should Virgin’s bid for Northern Rock be successful. Just days later, private equity firm JC Flowers dropped its bid. Is Virgin over confident or is it just press speculation?

JC Flowers, the US-based private equity firm, pulled out of the bidding process for Northern Rock only one week after submitting its revised bid. The firm said it was not sure it could satisfy both the government and its shareholders, but could it be that the press speculation is starting to make some sense?

Should Virgin Money emerge successful, it will rebrand the ailing mortgage lender and probably make many redundancies, including the marketing team, as its take-over will act more like a merger.

The Northern Rock brand will cease to exist and its customers will most likely lose out. However, Virgin does have the money to ensure its customers are looked after.

Virgin Money has never before been so high profile or as much on the radar as it is thanks to its bid for Northern Rock. Virgin Money launched in 1995, then called Virgin Direct. It offered “the lowest PEP in the market”. 

Virgin Money plans to pay £11 billion of the £25 billion Northern Rock owes the Bank of England instantly, as well as injecting £1 billion in equity for a controlling stake.

Eleven years later the brand has grown into its own skin expanding to South Africa, the US and Australia. The brand now offers credit cards, personal accounts, mortgages, loans, pensions, insurance, and savings and investments.

Moreover, Virgin seems to be able to overcome any catastrophe and has been often been voted in the top three brands we would be proud to work for. It’s a brand we have come to trust, thanks to Richard Branson and his friendly face of capitalism. Also – I suspect many of us read his autobiography, as I did, and know he is not your usual ruthless businessman but has the consumers’ interests at heart.

Is Virgin and Branson too strong and a trusted brand to compete with?

The Virgin brand itself is known for its sky high ambitions. The fact that Northern Rock itself has named Virgin as the preferred bidder comes as no surprise as we all know that when Branson sees a business opportunity he wants – he does not back down without a fight, as proved when he launched a court case against The National Lottery earlier this year. 

To read the news story related to this blog, go to mad.co.uk