27th Sep 2013 15:26
LONDON (Alliance News) - A consortium led by private-equity firm Corsair Capital Friday emerged as the winner in a battle to take a stake in 314 branches being spun-off by Royal Bank of Scotland as a condition of its bailout by the UK government during the financial crisis.
In a statement, RBS said it had agreed that the Corsair-led consortium will pay GBP600 million to be a significant minority shareholder in the new business, to be called Williams & Glyn's, when it is listed on the stock market.
The decision to work with Corsair means that rival bids from a Blackstone-backed private equity company and W&G Investments, a holding company specifically set up to bid for the branches by former Tesco Finance Director Andrew Higginson, have failed.
"This deal concludes what has been a very competitive process, with several highly credible bidders," RBS Finance Director Bruce Van Saun said in a statement.
RBS and the Corsair consortium, which includes investment firms Centerbridge Partners and RIT Capital Partners as well as the investment arm of the Church of England, will now work towards an IPO of Williams & Glyn.
RBS was ordered to sell the branches by the European Commission as a condition of receiving a massive state bailout from the UK Government during the financial crisis. The UK government took an 81% stake in RBS in a 2008 bailout as a result of the bank's its ill-fated acquisition of ABN Amro and over-ambitious growth strategy.
RBS had previously accepted a GBP1.6 billion bid by Santander UK in 2010 for the branches, but the sale fell apart after Santander pulled out in October 2012.
The Williams & Glyn business will serve nearly 1.7 million customers and has a GBP19.7 billion loan book funded by GBP22.2 billion in customer deposits, RBS said in a statement. It currently employs 4,500 people but this will rise to 6,000, the bank added.
The Corsair consortium will pay for a GBP600 million bond issued by RBS in cash. The bond will convert into a "significant minority stake" when Williams & Glyn is listed. The consortium will also be able to buy another 10% stake in the new bank in the IPO as long as RBS consents and its total stake is no more than 49%.
Royal Bank of Scotland is part-funding the Corsair group by providing it with a GBP270 million secured financing package.
"The consortium views this as an opportunity to create a genuine challenger bank, which will be a vibrant, healthy competitive force in UK banking and a new financial services provider to the UK public and small and medium sized businesses," Corsair Vice Chairman Mervyn Davis said in a statement.
In a separate statement, W&G Investments said it was disappointed not to have been picked. It had made a final bid of up to GBP1.75 billion to buy the branches outright, including GBP1.1 billion of cash upfront.
"We are disappointed that our final proposal was not accepted by the Board of RBS as we believed it offered full and fair value for the assets on offer and would have provided certain value to RBS shareholders," Higginson said.
RBS is understood to have accepted the Corsair bid because it wanted to retain a stake in the new business, BBC Business Editor Robert Peston said last week.
W&G Investments said it would now return remaining cash, estimated to be about GBP10 million, to its investors.
The new bank will be run by John Maltby, who was most recently head of Commercial Banking at Lloyds Banking Group. Philip Green, the former chief executive of United Utilities and non-executive director of Lloyds, will be the Chairman.
"Williams & Glyn's will commit to the highest standards of banking ethics and business conduct while providing increased customer choice in the UK Banking market," Maltby said in a statement.
Williams & Glyn's return to the UK high street comes after Lloyds launched TSB, another retail bank with a long heritage, back onto the high street last week. The network of 631 TSB branches will be divested either through an IPO in 2014 or through a private sale, a condition for the Lloyds bailout by the UK government in 2008 which saw the taxpayer take a 38.7% stake.
RBS shares were down 1.6% at 365.2 pence Friday afternoon.
By Steve McGrath; [email protected]; @stevemcgrath1
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