W&G Investments Plc, the investment vehicle headed by
) former director of finance, Andrew Higginson, is set to make a
bid worth £1.5 billion ($2.4 billion) for
The Royal Bank of Scotland Group plc
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Royal Bank of Scotland is yet to tide over its blues and still
remains 81% owned by U.K. taxpayers. Further, private ownership
looks unlikely in the near future. The bank has been ordered by
Europe's regulators - European Union - to sell as many as 315
branches to comply with state-aid regulations, under a project
named Project Rainbow.
W&G Investments is ready to shell out approximately £1.1
billion in cash apart from £400 million, depending on the
performance of the business on completion of the deal. W&G
Investments has also raised £15 million through a share sale to
fund a vigilant examination of the Project Rainbow business.
The branches on sale are Natwest branches in Scotland and the
parent company's branches in England and Wales. These have
roughly £21.5 billion in consumer deposits and serve small
businesses and consumers.
Rise and Fall of Royal Bank of Scotland
Once the shining example of Britain's banking system, Royal Bank
of Scotland has established that market dominance is transient.
Royal Bank of Scotland - which started out as a regional bank in
Edinburg - became Scotland's own economic miracle, on with nearly
26 acquisitions in 7 years (up to 2007).
However, when the banking crisis erupted, it became obvious that
many of the assets against which Royal Bank of Scotland had
borrowed money were worth only a portion of its previous value.
In 2008, the British government was forced to rescue the bank
with the biggest bailout in history worth nearly £45 billion ($70
billion). However, 5 years down the line, the British government
is still struggling to recover that amount and put the past
Others in the Fray
In October, Project Rainbow suffered a setback when
Banco Santander, S.A.
) stepped out of an agreement to purchase the branches.
Other than W&G Investments, the other final round bidders
include a combination of private equity firms Corsair Capital and
Centerbridge. There is yet another bid led by AnaCap Financial
Partners, in collaboration with U.S. private equity giant,
The Blackstone Group L.P.
However, Corsair and Centerbridge, unlike W&G Investments,
will not buy the Project Rainbow branches outright. The duo will
probably operate as partners of Royal Bank of Scotland until a
stock flotation in the future.
Initially, the British government was commended for dealing with
the financial crisis in 2007. However, the long process of
restructuring banks is hurting the still-weak British economy.
Further, the government's decision in 2008 to take a passive
approach to manage its stakes in the deeply troubled banks has
added to the country's woes.
However, after years of a muted approach, the Treasury is
adopting a strapping strategy for The Royal Bank of Scotland. The
British administration has pressed the bank to reduce its
investment bank, shrink its U.S. unit and refocus on the U.K.
Obediently following the orders, The Royal Bank of Scotland has
sold out of its stake in Global Merchant Services (WorldPay) and
RBS Sempra Commodities. It has also initiated the spin-off of the
insurance business as the Direct Line Group through an IPO. It
would have sold off the branches if the deal with Banco Santander
had not hit an obstacle due to delays in technology integration
However, we are encouraged by Royal Bank of Scotland's efforts to
restructure its business. With the divestment of its
non-profitable units, we believe, the bank will be able to wade
through troubled waters and regain its former glory.