Royal Bank of Scotland (RBS) is planning to divest almost its entire remaining stake in British motor insurer Direct Line Insurance Group, as part of its strategy to boost capital base, as the bank prepares to reveal an £8bn loss.
The stake, which the 81% British government owned bank intends to sell through a placement to institutional investors, represents 423.2 million shares or 28.2% interest. At current market price the stake is expected to be valued at nearly $1.9bn.
Following this sale, the bank will own only 4.2 million shares in Direct Line.
The recent trench of share sale is part of the bank’s agreement with European regulators to offload all of Direct Line by 2014 as a price for its 2008 bailout, when it received £45.5bn government state aid.
RBS said that the pricing of the shares will be determined by a book-building process and Goldman Sachs International, Morgan Stanley Securities and UBS Ltd will act as joint bookrunners in the offering.
In September 2013, RBS offloaded a 20% stake representing 427.4 million shares in Direct Line, for £630m ($1bn).
Earlier in March 2013, the bank divested 15.3% shares, representing nearly 229.4 million shares, through a placing of shares to institutional investors.
RBS sold out a 30% stake in Direct Line in a transaction valued at nearly £787m, in October 2012.
Most recently, the bank was reportedly planning to cut more than 20,000 jobs in the coming years, as part of CEO Ross McEwan’s Project Cook strategy to boost balance-sheet and control increasing operational expenses, reported media sources.
————————————————————————————————————————————————————————————————Image: Direct Line offices in Croydon. Photo courtesy of: Pafcool2.