Northern Rock shares rebounded yesterday after the troubled British bank revealed late on Tuesday that it had been approached by several unnamed parties with a view to a possible takeover.
The share price also rose after Northern Rock canceled its shareholder dividend -- making the crisis-hit group more attractive to any potential bidder, dealers said.
Northern Rock stock jumped 7.91 percent to ?1.76 in early deals yesterday, while London's FTSE 100 index of leading shares gained 0.65 percent to reach 6,438.40 points.
"The company has received a number of approaches regarding a variety of potential transactions, including the possibility of an offer being made for the company although no price has been referred to," Northern Rock said in a statement issued after the close on Tuesday.
"The board believes that it would not be appropriate to make any dividend payments in the interim until it can make a full announcement regarding the outcome of discussions with other parties and the development of the business model," the statement said.
The bank said it was canceling plans to pay ?59 million (US$119 million) in dividends on Oct. 26.
Despite yesterday's gains, Northern Rock has seen its share price slump by almost 75 percent in value since it was forced to request an emergency bail-out from the Bank of England (BoE) in the middle of the month.
"A private-equity takeover seems the more likely option today," Collins Stewart analyst Alex Potter, who has a "sell" rating on the stock, wrote in a note to investors yesterday. "It could come below market prices."
Merrill Lynch & Co is advising the board of Northern Rock on its options. The UK Treasury hired Goldman Sachs Group Inc to advise it on the future of Northern Rock, the Daily Telegraph reported on Tuesday.
"There's absolutely no guarantee any bid will be forthcoming and that it would be above or even at the current share price," analysts at Credit Suisse wrote to clients yesterday. "It's obviously better than if there were no interested parties, and indeed several approaches might create some price tension."
Former Goldman banker Chris Flowers may join the Cerberus Capital Management LP and Citadel Investment Group LLC hedge funds in splitting up Northern Rock, the Sunday Telegraph reported on Sunday, citing an unidentified person familiar with the proposal. Lloyds TSB Group Plc may be working with UBS AG on a possible bid for at least part of the bank, the Daily Telegraph said last Wednesday without citing any sources.
Confidence in the British banking system has been shaken since Northern Rock applied for the emergency funds from the BoE due to the global credit crunch.
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