City Funds In Last-Ditch Bid For RBS Branches

By Mark Kleinman, City Editor

A consortium of City investors has tabled a last-ditch bid to win control of 315 Royal Bank of Scotland (RBS) branches by pledging a substantially-higher payment to the taxpayer-backed lender.

Sky News understands that W&G Investments, a vehicle set up specifically to buy the branch network, tabled a revised offer within the last 48 hours even as RBS began leaning towards backing a rival bid involving the Church of England's pension fund.

The revised offer is not understood to include a substantial hike to the £1.1bn up-front cash payment promised by W&G in its original bid.

However, it is said to have altered its proposal to mean that RBS would receive additional payments on completion of a deal that would take the total value of its offer to well over £1.5bn.

Headed by Andrew Higginson, a former Tesco finance director (and non-executive director of BSkyB, the owner of Sky News), W&G's backers include leading fund managers such as Old Mutual, Schroders and Threadneedle.

RBS favours an alternative bid from a consortium led by Corsair Capital, an investment firm whose executives include Lord Davies, the former trade minister.

The branch network is being sold under the state aid deal that resulted from RBS's bail-out by British taxpayers in 2008, with the bank set a deadline of this autumn to offload it.

However, RBS is keen to retain a stake in the branches to share in a potential increase in value ahead of a flotation in what amounts to a bet on the recovery of the UK economy.

Unlike W&G's proposal, which would involve an outright takeover of the RBS branch network, the Corsair bid would entail buying just 49% with the remainder being listed on the stock exchange at an unspecified future date.

Sky News revealed in July that the Corsair bid was being backed by the Church Commissioners for England in an attempt to establish an ethical dimension in the group's vision for the small business-focused bank.

An earlier deal to sell the network, codenamed Project Rainbow, which comprises all RBS-branded branches in England and NatWest branches in Scotland, fell through last year when Santander UK pulled out citing concerns about IT systems.

Santander had initially agreed to pay £1.65bn for the branches, which include £19bn of assets, 250,000 small business customers and approximately 5,000 staff.

W&G and RBS both declined to comment.

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