RBS aims for £500m Direct Line Share Sale

The Royal Bank of Scotland tonight announced a plan to sell a stake in insurance group Direct Line which it expects could raise up to £530 million from institutional investors.

The 82-per cent taxpayer-owned bank originally floated its former insurance division in October for 175p per share, while retaining a 65.3 per cent of the firm. RBS said that it aimed to sell a 15.3 per cent slice, or 229.4 million Direct Line ordinary shares - worth £482.4m on a closing price of 210.2p. The deal would bring its stake down to just a shade under 50 per cent. A further “over allotment option” would see it sell a further 22.9 million shares, worth £48.1m.

Direct Line, which owns the Churchill and Privilege insurance businesses and the Green Flag breakdown service, was spun out of the bank on the orders of European regulators as a condition of its 2008 taxpayer bailout.

The transaction comes just a day after Lloyds Banking Group pocketed £400m in a sale of a stake in its wealth management firm, St James’s Place.

RBS earlier this month announced plans to float up to 25 per cent of its US subsidiary Citizens as it comes under pressure to sell off some of its government-owned shares next year. The Edinburgh bank unveiled a £5.2 billion pre-tax loss for 2012 after it paid £2.2 billion in provisions related to the misselling of PPI products. Rival insurance firm Esure is also planning to raise £50m when it embarks on a £1.2bn IPO later this month. Goldman Sachs, Morgan Stanley and UBS are acting for RBS as joint book runners in the sale.