Shares in Northern Rock PLC jumped Wednesday on reports that private equity firm J.C. Flowers has raised some $30 billion in preparation for a possible takeover.
Media reports said that Chris Flowers, who runs the fund, wants to keep the troubled bank whole rather than split it up, cheering investors.
Northern Rock, Britain’s most public victim of the global credit, said last week it had received approaches from a number of different parties about “a variety of potential transactions,” including a takeover, and that it was in preliminary discussions.
Several reports have named J.C. Flowers and fellow New York-based firm Cerberus as potential buyers.
Northern Rock declined to comment, but confirmed that it had appointed Citigroup Inc. to work alongside Merrill Lynch to advise on a range of options for the future of the company.
The lender’s shares rose 11.95 percent to close at 151.80 pence ($3.10) Wednesday. The stock has dropped almost 80 percent since Sept. 13, the day before the bank issued a profit warning and announced it had requested emergency funding from the Bank of England.
Collins Stewart analyst Alex Potter said there was likely to be a 190 pence ($3.88) ceiling on Northern Rock bids and that J.C. Flowers is unlikely to go that high.
“We would continue to sell into any strength and again caution that this is a very high risk situation,” Potter said.
He said that a private equity bid would require bank backing for ongoing balance sheet funding and that the price paid for the equity will be mainly contingent on this funding cost.