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March 19, 2013 8:31 pm
Royal Bank of Scotland is preparing to receive bids for more than 300 branches today ahead of a deadline on Thursday to receive proposals for the estate.
A consortium of City investors is the latest group to enter the race for the 316 branches, the disposal of which is demanded under EU state aid rules. Led by Andrew Higginson, a former finance director at Tesco and current chairman of Poundland, the grouping of more than 20 institutions is expected to submit a proposal to fund and float a company which would have a binding commitment to acquire the branches in the future, according to people close to the situation.
RBS is required to sell a chunk of its UK retail business as a condition of the European Commission’s endorsement of its rescue by the UK government. A planned sale to Spain’s Santander, initially valued at £1.65bn, fell apart in October largely because of mismatched IT systems.
RBS announced a change of strategy earlier this year, saying it would focus on building a fresh technology platform to create a standalone business. This could then be floated or sold under the Williams & Glyn’s banner, the former brand name associated with the branches, with the former considered the most likely option.
However, the bank also raised the possibility of an investor taking a stake in the business before an initial public offering. Thursday’s deadline will be the last opportunity for bids for a full sale.
A number of interested groups are expected to submit offers including joint private equity bidders JC Flowers and Apollo, and Virgin Money, which is backed by buyout group WL Ross, according to people close to the process.
However, the setback after the collapse of the deal with Santander coupled with the time needed to create the standalone unit means RBS is unlikely to meet a deadline for the disposal, known internally as Project Rainbow, set at the end of this year.
When approving bank bailouts, Brussels imposes stringent terms designed to ensure the taxpayer support is fully repaid and to maintain a level playing field with rivals not receiving state backing.
The UK has yet to make a formal request for a time extension or a revision of the RBS bailout conditions. However, Joaquín Almunia, the EU competition commissioner, has in the past given banks facing difficulties more time to meet their commitments.
In return the commission would impose penalties on RBS of some kind – such as an extension of restrictions on business practices or the sale of a separate asset – to preserve the balance of its restructuring plan.
Officials are likely to take a pragmatic view as long as the bank proves it is making every effort to dispose of the business as promptly as it can. RBS believes Brussels will prove understanding given its efforts to make the disposal.
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