RBS raises £630m from sale of Direct Line stake
Third sale of stake leaves banking group with 28.5 per cent of insurer
Royal Bank of Scotland has to sell its stake in Direct Line to comply with European Union rules after receiving a £45.5 billion bailout in 2008 and 2009. iPhotograph: Johnny Green/PA Wire
RBS sold about 300 million shares at 210 pence apiece to institutional investors, or 20 per cent of Direct Line, the Edinburgh-based lender said in a statement today.
Direct Line fell 2.2 per cent to 213.2 pence by 8.17am in London. RBS now owns about 28.5 per cent of the insurer.
RBS, Britain’s biggest government-owned lender, has to divest the insurer to comply with European Union rules after receiving a £45.5 billion bailout in 2008 and 2009.
Direct Line, which sold shares to the public in October, is cutting costs and seeking to sell more profitable policies amid falling premiums in the UK and lower returns on investments amid record-low interest rates.
“This successful sale keeps RBS fully on track to meet its obligation to divest its stake in Direct Line by end-2014,” RBS finance director Bruce Van Saun said in the statement.
The calculation of the proceeds assumes an over allotment option to sell 27.3 million shares is exercised in full. Issuers in Europe, the Middle East and Africa have raised about $74 billion in additional share sales this year, compared with about $37 billion in the same period in 2012, according to data compiled by Bloomberg.
The UK government sold 4.28 billion shares for £3.2 billion in Lloyds Banking Group this week in the largest accelerated sale of secondary shares since 2009.
Goldman Sachs, Morgan Stanley, Royal Bank of Canada and UBS are managing the Direct Line sale, which started after the end of trading in London yesterday. (Bloomberg)