In one of the biggest stock market floatation by a UK company in recent years, Royal Bank of Scotland (RBS) has announced its intention to float its Direct Line insurance unit.
RBS announced that it would sell at least 25% of the company in the initial public offering (IPO), which is the minimum required as per the UK listing rules. RBS is planning a three-tranche sale – with one this year, one next year and the final sale in 2014.
The infamous bank is going ahead with its plan despite the stagnant floatation market, which has forced several prospective issuers to plug out their IPOs. European regulators have ordered RBS to divest its entire stake in Direct Line by the end of 2014, after ceding control of the business by the end of 2013.
Private equity groups had shown interest in the business, but people close to the process downplayed the prospect that they would make an offer. Goldman Sachs and Morgan Stanley are working as joint global co-ordinators, sponsors and bookrunners on the IPO, while UBS is also a joint book-runner. The shares will be offered to institutional investors, as well as to retail investors through intermediaries.
Lukewarm investor interest was also seen by German insurer Talanx when it had scrapped its IPO plans this week just days after it had announced intention to proceed.
RBS will market the offer to potential investors over the next few weeks and would have to secure a good deal as the UK taxpayers have encountered more than £20 billion loss after Britain infused £45 billion into the bank to secure its future.