Taxpayer-owned RBS could stand to pocket as much £530m as it seeks to satisfy state aid rules by selling off shares in household insurance name Direct Line.
The placing of stock amounting to 15.3% of the Direct Line’s total share capital was announced after close of trading last night.
Disposing of a stake which comprises 229.4 million ordinary shares will leave the 81% publicly-owned lender with a 49.99% holding in the insurer made famous by ads featuring the little red phone on wheels.
The sale comes as RBS continues efforts to hive off the Direct Line business.
It did not reveal the likely selling price, instead announcing the immediate commencement of an accelerated bookbuild offer process.
But at last night’s closing price of 210.2p, the stake could be expected to raise around £480m.
Including an over-allotment option of an additional 22.9m shares that figure could rise to £530m, with RBS’ remaining stake comprising 48.5% of available stock in Direct Line if the additional stocks are sold.
Direct Line floated in October at an issue price of 188p, climbing to a high of 225p in January.
RBS was ordered to sell its interest in its former subsidiary in the aftermath of its £45 billion taxpayer bailout in 2008, as a condition placed upon the Gogarburn-based lender by European authorities.
The bank was told to cede control of Direct Line by the end of 2013, and completely divest all interests by December next year.
It has agreed not to divest any further interest in Direct Line for six months under the terms of an agreement with joint bookrunners and placing agents Goldman Sachs International, Morgan Stanley Securities Ltd and UBS.
Lloyds Banking Group announced it had made £400m overnight after agreeing a mass sale of shares in top-end wealth manager St James’s Place.
The banking giant, 40% owned by the public purse following a Government bailout at the height of the financial crisis, said it successfully placed 102m shares with institutional investors, with total gross proceeds amounting to around £520m.
Lloyds had announced the intended sale late on Monday, saying it hoped to simplify the group and focus on core customers. The stock to be sold amounts to 20% of total shares in St James’s Place, and leaves the bank holding a 37% stake in the investment firm.
Profits from the deal, which came as St James’s Place shares climbed to a near all-time high following a nine-month growth spurt, would be used for “general corporate purposes”, Lloyds said.
The disposal is expected to help the bank boost its capital position at a time when regulators are preparing to publish their report on the health of Britain’s financial institutions. Shares have been placed with institutional investors.
Settlement, at a price of 510p, is expected on Friday.
business@thecourier.co.uk