RBS Names Corsair-Led Group in Pre-IPO Branch Investment

Royal Bank of Scotland Group Plc said a group headed by private-equity firms Corsair Capital LLC and Centerbridge Partners LP is the preferred investor ahead of a planned initial public offering of its 314 branches.

The consortium agreed to pay 600 million pounds ($966 million) for as much as 49 percent of the business, Edinburgh-based RBS said in a statement yesterday. Corsair, based in New York, will take the stake in the branches through a bond that converts into shares after the IPO and pay as much as 200 million pounds more based on the performance of the stock.

RBS has to sell the branches, branded as Williams & Glyn’s, by 2014 to comply with European Union state-aid rules after receiving a 45.5 billion-pound bailout in 2008 and 2009. Chief Executive Officer Stephen Hester, who departs at the end of September, said last month while RBS (RBS) would prefer to sell the business in an IPO, it is open to private offers.

“This deal concludes what has been a very competitive process, with several highly credible bidders,” RBS Finance Director Bruce Van Saun said in the statement. “This transaction demonstrates that Williams & Glyn’s is a viable and attractive business which will be positioned as a strong, customer-focused challenger bank.”

Photographer: Chris Ratcliffe/Bloomberg

A customer uses an automated teller machine outside a branch of Royal Bank of Scotland Group Plc in London on Sept. 27, 2013. Close

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Photographer: Chris Ratcliffe/Bloomberg

A customer uses an automated teller machine outside a branch of Royal Bank of Scotland Group Plc in London on Sept. 27, 2013.

Shares Drop

RBS fell 1.2 percent to 366.5 pence in London trading. The shares have gained about 13 percent this year.

The securities unit of Britain’s largest government-owned bank will provide the Corsair-led group with a 270 million-pound loan to help finance the bid, according to the statement. RBS was advised by UBS AG (UBSN) and the acquiring consortium worked with HSBC Holdings Plc (HSBA) and Barclays Plc.

RIT Capital Partners Plc and Church Commissioners for England are among investors in the consortium. The Williams & Glyn’s management team will include John Maltby as CEO and Philip N. Green, Mervyn Davies and Lance West as future directors, according to the RBS statement.

The group saw off a competing bid from a joint bid from AnaCap Financial Partners LLP and Blackstone Group LP (BX), which was similarly structured, according to people familiar with the matter, who asked not to be identified.

W&G Investments Plc (WGI), backed by money managers including Schroders Plc (SDR), Threadneedle Asset Management Ltd. and Lansdowne Partners Ltd., offered as much as 1.75 billion pounds to buy the business outright, it said in a statement yesterday.

‘Disappointed’

“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,” W&G Chairman Andrew Higginson said in the statement.

The RBS branches have about 22.2 billion pounds in customer deposits and 19.7 billion pounds of total assets, the bank said. They generated 305 million pounds in operating profit in 2012, about 10 percent of RBS’s annual total.

“This looks like a pretty good deal for RBS,” said Gary Greenwood, an analyst at Shore Capital in Liverpool, England, with a buy recommendation on the shares. “The equity upside is still there for them.”

RBS and the U.K. Treasury will engage with the EU to agree an extension to the sale deadline, it said. Banco Santander SA (SAN), Spain’s biggest bank, abandoned its 1.7 billion-pound planned purchase of the branches in October.

To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net

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

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