Virgin Money to buy Northern Rock for £747m

The takeover of the Newcastle-based bank, which was taken into public ownership in February 2008, is expected to be completed by the end of this year.

The Government will receive an initial £747 million with the potential to secure £1 billion in total - less than the estimated £1.4 billion it has injected into the bank during its period of public ownership.

Virgin Money failed in a bid to buy the bank following its collapse in 2007.

The operational headquarters of the combined business will be in Newcastle, while Virgin Money has pledged no further compulsory redundancies beyond those already announced for at least three years.

Virgin Money chief executive Jayne-Anne Gadhia said the deal would create a “major new competitor” in the UK retail banking sector.

She added: “The two businesses complement each other well and together they will create a strong bank with over four million customers.”

The acquisition includes 75 branches and 2,100 staff, one million customers, a £14 billion mortgage book and retail deposits worth £16 billion.

Virgin Money, which was founded in 1995, has around three million customers.

Chancellor George Osborne said there would be a “powerful new presence on the high street” which would offer “real choice and competition”.

“It’s also good for British taxpayers - we are getting some of the money back that we put into the banking system under the last government.

“And it’s also good for the north east of England, because we are seeking to protect jobs there and make sure that the headquarters of Virgin Money will be in Newcastle.”

He added that the Treasury had taken independent advice on the deal and “looked carefully at all the figures”.

“It was clear to us that this was the best deal for the British taxpayer, we were getting more money back than any other deal on the table,” he said.