RBS Says Sale of Direct Line Stake Raised 507 Million Pounds

Royal Bank of Scotland Group Plc raised 507 million pounds ($758 million) by selling a stake in Direct Line (DLG) Insurance Group Plc, the U.K.’s biggest home and motor insurer, to comply with European Union state-aid rules.

Britain’s biggest publicly owned lender sold 252.3 million Direct Line shares to institutional investors for 201 pence apiece, about 4.4 percent less than yesterday’s closing price. The sale will cut RBS’s stake in Direct Line to 48.5 percent if the over-allotment option is exercised in full, the Edinburgh- based lender said in a statement today.

RBS was forced to sell the operation to comply with EU rules after receiving a 45.5 billion-pound government rescue in 2008 and 2009, the biggest bank bailout in the world. The shares were sold for less than their book value of 216 pence, according to Ian Gordon, an analyst at Investec Plc in London with a sell rating on the Scottish lender.

“This sale is part of our ongoing delivery against EU commitments and will take our ownership below the 50 percent level,” Finance Director Bruce Van Saun said in the statement. The proceeds will be used for “general corporate purposes,” according to RBS.

The lender sold 30 percent of Direct Line in October, raising 787 million pounds and must dispose of its remaining shares by the end of 2014. Direct Line slipped 2.4 percent to 205.2 pence as of 10:54 a.m. in London trading. The stock was first offered to the public for 175 pence.

Goldman Sachs Group Inc., Morgan Stanley and UBS AG were joint bookrunners on the share sale.

To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.