Private equity firms could derail Direct Line flotation

By GARETH MACKIE
Published on 15/07/2012 11:22

Royal Bank of Scotland’s plans to float its insurance arm were today reported to be in doubt as it emerged that two private equity consortiums could launch rival bids for the business.

The bank has been ordered to sell Direct Line, whose brands include Churchill and breakdown recovery service Green Flag, after taking a £45 billion UK government bail-out and had been expected to float the business in the second half of 2012.

An official intention to list on the London Stock Exchange is expected to be filed next month, and the flotation is believed to have been lined up for September.

However, it was reported today that two consortiums of private equity firms are planning rival bids, which could be good news for RBS it as it seeks to rebuild its finances in order to help the government, which owns an 82 per cent stake, get back some of the billions it pumped into the lender.

Two US buy-out giants, Blackstone and Bain Capital, are expected to team up for one bid, while Kohlberg Kravis Roberts, Apax and BC Partners are believed to be hatching a rival offer. A move could come as soon as the end of the month.

Direct Line is thought to be worth some £3bn to £4bn. The business moved back into the black last year with an operating profit of £454 million, compared to a £295m loss in 2010.