Virgin Money float yields £85m for Richard Branson

Sir Richard Branson is cashing in up to £85m of his stake in Virgin Money following the flotation of the bank.

The entrepreneur is selling 15% of his stake in the bank, which was set up 20 years ago but has grown rapidly since buying the “good” part of the collapsed Northern Rock from the government two years ago.

Shares in the bank were priced at 283p on Thursday – at the bottom of the range it had been discussing with prospective investors – valuing the 75-branch business at £1.3bn. The price was cut after the flotation was delayed from last month amid turbulent stock markets.

The other major backer – the US investor Wilbur Ross – is also selling off a similar size stake and, like Branson, will be left with around a third of the shares. They will each sell at least £70m of shares or up to £85m if they release more shares.

Among the other sellers is Jayne-Anne Gadhia, the chief executive, who is selling 25% of her stake for around £2m. She is also receiving an award of 333,215 shares – worth just under £1m – for conducting the flotation. This is less than a third of the maximum number she could have been handed. Gadhia will receive 40% of those shares immediately, with the remainder coming in equal portions in December 2014, 2015 and 2015. Under previous share schemes, Gadhia also has shares worth around £1.9m due to be handed to her by 2017.

“There are many colleagues, like me, who have spent 20 years working with the Virgin brand. As we previously announced, each employee will be awarded £1,000 worth of shares in the business upon flotation meaning that all colleagues have a stake in our future success,” Gadhia said.

Virgin Money employs 2,800 people, 1,800 of whom used to work for Northern Rock, which was nationalised in 2008. Northern Rock was then split in 2009 to a “good” part – sold to Virgin – while the taxpayer continues to own other mortgages sold by Northern Rock through the government’s UK Asset Resolution company.

Virgin, which had tried to buy Northern Rock before it was nationalised, paid £747m for the bank in 2011 but said it had now paid £1bn to the taxpayer. Another £50m will be received as a result of the flotation.

City minister Andrea Leadsom said: “A key part of the government’s long term economic plan is to increase competition in the banking sector so that customers get a better deal. So it’s great to see market challengers like Virgin Money building their business and taking on the big banks.”