Northern Rock's biggest shareholder is today hoping for an improved offer for the lender after querying the value of the salvage bid led by Sir Richard Branson's Virgin Group.
Hedge fund RAB Capital - owner of a 6.7% stake through its RAB Special Situations fund - said the Virgin consortium's bid undervalued the bank. The consortium is planning to inject £1.3billion of funds in return for a controlling stake of at least 55% in the stricken firm.
Part of the cash will be raised through new shares being offered at 25p massively diluting existing shareholders. Traders appear to think RAB's action will elicit higher offer, as Northern Rock's shares rose 5% to 115.3p in early trade today, following a 28% advance yesterday.
RAB Capital chief executive and manager of RAB Special Situations, Philip Richards, said: 'We do not believe that this proposal reflects the true value of Northern Rock, and we would expect either that this proposal be improved or that alternative proposals be brought forward.'
It emerged late last week RAB has combined forces with hedge fund peer SRM Global Fund, which has 6.4% of the company, to requisition an EGM. Combined, the two have the power to demand an extraordinary meeting, a move which has to be backed by 10% of shareholders.
The pair will put forward a resolution requiring Northern Rock's articles of association be rewritten to include a clause saying a disposal of more than 5% of its assets requires shareholder approval. Small shareholders, as represented by the UK Shareholders' Association (UKSA), are backing RAB and SRM.