Branson pockets £85m in flotation
City Editor SIR Richard Branson is in line for a windfall of around £85m following the long-awaited float of Virgin Money.
The tycoon, worth an estimated £3.6bn, is selling 15pc of his stake. US billionaire backer Wilbur Ross is expected t o make a s i milar amount.
It is a piece of good news for Branson after his Virgin Galactic spaceship crashed in the Mojave desert in California two weeks ago.
The float, which raised around £150m for Virgin Money, also triggered a £3m award for its chief executive Jayne-Anne Gadhia.
She was handed a £943,000 share bonus, which will be paid in instalments, on top of her £1.19m annual package. But the award is less than a third of the maximum she could have received.
Gadhia cashed in 25pc of her stake for around £2m. The bank will pay a licence fee of £2.4m a year to Virgin Enterprises, which manages the brand. Virgin opted to price its shares lower than initially hoped after last month delaying its float due to volatility in the stock market.
This was exacerbated by the ebola crisis, growing tension in Ukraine and the malaise in the eurozone.
Virgin became the second bank in a week to have cold feet, with rival challenger bank Aldermore also putting plans to list on ice.
But earlier this month Virgin said its plans were back on track as its concerns over the market had subsided.
The Bank of England also removed a major obstacle, announcing that capital requirements for banks would be less stringent than previously feared. The shares were priced at 283p, when it had targeted a maximum of 333p. This values the business at around £1.25bn instead of £1.45bn.
The price tag is significantly lower than the £2bn that had previously been touted in the market, though insiders now claim that was never a realistic goal.
A market capitalisation of £1.25bn still values the bank at 1.2 times Virgin’s assets. That compares favourably with rival TSB which is trading at 0.85 times its book value following its flotation in June, and also trumps HSBC and Barclays.
Among new investors are fund manager Henderson, which grabbed a 3.4pc stake.
Gadhia said: ‘ Our capability to deliver growth at meaningful scale, the quality of our balance sheet and the fact that we are unburdened by legacy issues makes us stand apart from other banks.’
She added that this gave the potential to deliver returns to shareholders through ‘capital growth and progressive dividend payments.’
But the listing received a lukewarm welcome on the stock market yesterday, remaining at 283p.
It also received a mixed reaction from City commentators.
David Buik from broker Panmure Gordon said: ‘I suppose you could say job done. But I think there is some resentment from the investment community that this is just making two rich individuals even richer. The actual benefit for the investment world is pretty unattractive. Bank shares are not exactly the flavour of the month.’
Richard Hunter from Hargreaves Lansdown said: ‘It’s pretty bold of Virgin to go ahead so soon as I’m not entirely convinced that the markets have changed that much since last month. But this could pave the way for future fund raisings of listed companies.’
He said the listing could help empower Virgin and enable it to throw down a challenge to the High Street giants. ‘The Virgin PR machine has to whirr into action. Although they call themselves a challenger bank they are still just scratching the surface.’ The float triggers a final £50m payment by Virgin to the government for its cut price purchase of Northern Rock in 2012.
This pushes the final price paid above £1bn for banking and lending arm of the Newcastle based lender above £1bn. Some 2,800 employees have received £ 1000 worth of shares.