TROUBLED Northern Rock could be torn apart by a sale to private equity bidders, a shareholders group warned last night.

Roger Lawson, a spokesman for the group representing the interests of Northern Rock shareholders, also said directors of the Newcastle-based bank would be "bonkers" to agree to a takeover when the firm's value was at its lowest.

Unconfirmed reports yesterday suggested that two private equity firms, Cerberus and JC Flowers, both based in the US, were due to meet executives of Northern Rock to discuss separate bids.

Financial analysts said rumours were sweeping the stock market of a rescue bid at 175p a share, valuing the bank at £737.1m.

Shares in Northern Rock rebounded slightly on the speculation, ending the day at 135.6p, up 2.65 per cent on the previous day's trading.

They had earlier hit a new low of 112p a share. At its peak in February, shares were trading at £12.51.

Yesterday marked the tenth anniversary of the former building society's stock market listing.

Last night, Mr Lawson said: "The private equity firms concerned are likely to be only interested in buying them at a very cheap price.

"There is a very big risk that Northern Rock will not remain as an independent financial institution as they will take it apart.

"They will take the mortgage book and sell it on to other banks and I cannot see much future for the staff at Northern Rock either."

He added: "This is in essence a company that has a temporary problem and the only way the shareholders will see a reasonable value on their investment is if it is permitted to stabilise itself and given a reasonable breathing space, with financial support from the Bank of England if required.

"The directors must be bonkers if they allow it to be sold at this time. In a year's time, the financial markets are likely to be back to normal and this company will be able to continue and be very profitable."

Northern Rock's woes began when it was forced to ask the Bank of England for emergency funding after the global wholesale credit market, upon which it raises the majority of its funds, dried up.

Subsequently, £2.5bn was withdrawn by worried savers, while the bank's shares have fallen nearly 80 per cent in the past few weeks.