DEALTALK-RBS branch bidders left hanging as bank mulls options

Wed Jan 30, 2013 11:19am EST

Related Topics

* Bidders still awaiting response to proposals-sources

* Bidders had expected shortlist or preferred bidder in Jan

* RBS could take up to 6 months to make decision - sources

* Branch sale to Santander collapsed in October

By Laura Noonan and Matt Scuffham

LONDON, Jan 30 (Reuters) - Bidders for hundreds of branches being sold by Royal Bank of Scotland submitted their offers six weeks ago, hoping for a response by the middle of this month. They're still waiting.

Two sources close to the process said part-nationalised RBS had given bidders for the 316 branches no substantial feedback since offers were submitted in mid-December, even though they had initially been told the field would be narrowed to a short list or a preferred bidder by mid-January.

One of the sources said bidders had been told informally in mid January that it would be "at least February" before RBS gave any update on their offers and no due diligence or other work was in train.

The delay represents the latest setback in a lengthy sale process that was derailed in October after a 1.65 million pound ($2.6 million) offer from Spain's Santander collapsed when the process of carving out the business proved too onerous.

Indeed, a sale may prove so problematic that RBS is forced back to the less-preferred option of a stock market flotation for the chain, likely to take longer to organise and which would be prone to the usual vagaries of stock market mood afflicting any new share offering.

RBS has been ordered to sell the branches in return for receiving a 45.5 billion pound bailout during the 2008 financial crisis which left British taxpayers owning 81 percent of the bank.

The latest bidding round attracted offers from Richard Branson's Virgin Money and, jointly, U.S. private equity houses JC Flowers and Apollo. But bids fell well short of Santander's offer and RBS is exploring alternatives.

The bank is trying to tempt Britain's largest member-owned financial institution Nationwide back into the process, sources have said. Nationwide did not submit a proposal in December but sources say it has continued to talk informally with RBS.

DUAL TRACK

RBS declined to comment on the sale process, as did UBS, which is advising the bank on the sale. Virgin Money, JC Flowers and Nationwide also declined to comment.

One source close to the process told Reuters RBS was adopting a "dual track" approach, examining options for both an outright sale and stock-market listing of the business.

Yet the source said it could take up to six months for the bank to make a decision. At that point, it is likely to ask Britain's Treasury to request the European Union extends a deadline for RBS to sell the branches by the end of 2013.

An extension of the deadline would give RBS more time to prepare for a flotation, if it is unsuccessful in pulling off a direct sale, which sources said is still its preferred option.

The business has been ring-fenced and run under separate management so the process of spinning it off would be relatively straightforward. Dubbed "Rainbow", it made an operating profit of 186 million pounds in the first six months of the year.

Analysts said the lack of credible buyers means RBS is likely to need more time to achieve a sale and will have to accept a much reduced price.

"The simple truth is that there ... aren't many obvious potential buyers for this particular asset, hence why, in likelihood, RBS will have to crystalise a loss to achieve disposal," said Investec analyst Ian Gordon.

Rival Lloyds Banking Group has also struggled to sell around 630 branches it was ordered to sell following a bailout which left it 40 percent state-owned. It has agreed terms to sell the branches to the Co-operative Group but has yet to complete the sale.

FILED UNDER: