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* Virgin Money to raise 150 mln pounds from IPO
* Company expected to be valued at 1.5 bln-2 bln pounds
* Branson, Wilbur Ross to sell shares in offer (Adds CEO comments, details on shareholdings)
By Steve Slater
LONDON, Oct 2 (Reuters) - Britain's government, almost 3,000Virgin Money staff and entrepreneur Richard Branson will share amulti-million pound windfall when the challenger bank lists inLondon in the coming weeks.
Virgin Money intends to raise 150 million pounds ($243million) from a stock market listing in London, the company saidon Thursday. It will pay 50 million pounds to the UK Treasuryunder the terms of its purchase of nationalised lender NorthernRock in 2011.
Virgin will also give each of its 2,800 staff shares worth1,000 pounds, which they can sell after one year. About 2,000staff will also get 1,000 pounds of shares that were awarded atthe end at the end of 2012, subject to the company listing.
Branson, one of Britain's best known businessmen who foundedVirgin as a record company in 1970 and has since pushed intoairlines, telecoms and space travel, will sell part of his stakein the offer, but Virgin declined to say how much.
Analysts have estimated Virgin Money will be valued atbetween 1.5 billion and 2 billion pounds, potentially valuingBranson's stake at almost 1 billion pounds.
The listing effectively marks the return to the stock marketof Northern Rock, which collapsed in 2007 after it suffered thefirst run on a British bank in more than a century.
News of funding problems prompted customers to rush towithdraw their cash, making the bank an early symbol of thefinancial crisis. Britain nationalised the lender and split itin two, and Virgin bought much of the business.
Virgin Financial Investments owns 46.5 percent of VirginMoney, and WL Ross, the U.S.-based investment vehicle of U.S.billionaire Wilbur Ross, owns 44.9 percent.
Virgin said both men and other shareholders and employeeswill sell shares in the offer so that the free float of thecompany will be at least 25 percent when it lists, indicatingthat more than 375 million pounds of new and existing shareswill be sold in total in the offer.
BANK FLOTATIONS
Newcastle-based Virgin Money would be the fourth UK bank tofloat this year, following the listings of TSB andOneSavings and the plans by Aldermore to arrive soon.
Chief Executive Jayne-Ann Gadhia, who will become the firstwoman to head a publicly listed UK bank, said the company hadalways planned to list within three years of the Northern Rockdeal.
"This is part of the natural evolution of the company andone we're very pleased to be taking," she told Reuters.
Gadhia said she hoped staff would celebrate the share award.
"The staff that saw Northern Rock through the crisis havedone brilliantly to make sure the business continued to flourishand get us to this place."
Other banks preparing for initial public offerings includeSantander UK (part of Spain's Santander ), Shawbrook andMetro Bank. Williams & Glyn is being spun out from Royal Bank ofScotland and could list before the end of 2016.
The new banks are looking to pick up business fromestablished rivals who are slimming down in order to bolstertheir capital positions and meet tougher rules from regulators.Britain's economic growth and the removal of concerns aboutScotland separating have encouraged the banks to list.
Virgin Money said the 150 million pounds of new shares itsells will support its growth and boost its capital strength.
It has 2.8 million customers and 75 branches, and made anunderlying pretax profit of 59.7 million pounds in the first sixmonths of this year. That was up from 53.4 million for all of2013, its first profit since the Northern Rock deal. (Reporting by Steve Slater; Editing by Keith Weir)
