Virgin group sells mortgage business

Sir Richard Branson's Virgin group is selling its 25% stake in mortgage business Virgin One to Royal Bank of Scotland (RBS) for £45m, it emerged today.

The deal will see RBS, which already has a 50% stake in Virgin One, take full control of the business, as it is also buying the 25% share held by Australian finance group AMP.

Virgin One was established in 1998 and now has more than 70,000 customers and mortgage assets of £3.75bn.

RBS chief executive Fred Goodwin said: "After three years the company is already trading profitably and its share of net new business makes it a Top 10 mortgage lender."

RBS is paying £100m to buy the two stakes as well as releasing an additional £65m, representing capital put into the business by AMP.

The deal will see £120m of shareholder capital returned to AMP - representing half the £100m payment, the £65m capital and a £5m payment of an internal loan. Virgin will receive £45m.

Virgin also today said it would reorganise its two joint ventures with AMP under one name, Virgin Money.

The ventures - Internet financial products arm Virginmoney, and investment and pension arm Virgin Direct - will continue to be 50:50 owned by AMP and Virgin, but will be merged into a single business.

All three businesses, Virginmoney, Virgin Direct and Virgin One, are based in Norwich and employ a total of about 1,500 staff.

Virgin chairman Sir Richard said: "The new business model will give customers everything they would expect from Virgin in financial services."

Virgin is planning to invest some of the profit from the deal in Virgin Money, while some will be ploughed into its mobile phone business and into expanding its retail operations abroad.

It will also keep some back to build up its cash mountain.

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