Royal Bank of Scotland Group Plc is starting to whittle down bidders for the 316 branches regulators are forcing it to sell as some of the U.K.’s biggest fund managers face off against offers from U.S. private equity firms, people with knowledge of the discussions said.
A group of 20 U.K. institutions, including Schroders Plc and F&C Asset Management Plc, are expected to submit a bid before tonight’s deadline, said two of the people, who asked not to be identified as the talks are private. JC Flowers & Co., the private-equity firm started by former Goldman Sachs Group Inc. banker J. Christopher Flowers, will make an offer with Apollo Global Management LLC, while Centerbridge Partners may team up with Corsair Capital, the people said. AnaCap Financial Partners LLP will make a separate offer, the people said. Virgin Money Holdings (U.K.) Ltd. may also bid, one of the people said.
RBS has to sell the outlets by 2014 to comply with European Union state-aid rules after receiving 45.5 billion pounds ($69 billion) in the biggest banking bailout in the world in 2008 and 2009. Banco Santander SA (SAN), Spain’s biggest bank, abandoned its 1.7 billion-pound planned purchase of the branches in October, citing completion delays. The branches may now fetch about 1 billion pounds, one of the people said.
RBS Chief Executive Officer Stephen Hester said last month that while the lender would prefer to sell the unit through an initial public offering, it was open to offers. The business is already being separated from RBS and could be rebranded as Williams & Glyn’s, Hester said. UBS AG is managing the sale, which has been codenamed “Rainbow.”
Officials at RBS, Centerbridge, AnaCap, Corsair, Virgin, JC Flowers and Apollo declined to comment. Officials at F&C and Schroders didn’t immediately respond to requests for comment.
The lender is open to structuring the transaction to suit the needs of the different bidders, one of the people said. That may include selling a minority stake to an investor before a subsequent initial public offering, they added.
The Schroders-F&C group is being led by Andrew Higginson, a former Tesco Plc finance director, and has retained Canaccord Genuity Ltd. to advise it, one of the people said. Canaccord declined to comment.
Nationwide Building Society is no longer involved in the discussions, a person with knowledge of the matter said. An official for the U.K. firm declined to comment.
The RBS unit up for sale has 21.5 billion pounds in customer deposits and serves about 2 million small businesses and consumers. It earned 305 million pounds in operating profit in 2012, about 10 percent of RBS’s operating profit for the year.
RBS has signalled to the European Commission that it may seek an extension to the branch-sale deadline, though it hasn’t formally asked for one yet.