NAB Remains In The Running For RBS UK Branch Network

Post by Sharat on March 10, 2010 · Under Business News, Company News, International Business News, Mergers & Acquistions, banking · Comment

Australian banking major National Australia Bank (NAB) and Virgin Money remain in the running for the acquisition of a 318 strong branch banking network owned by troubled British lender Royal Bank of Scotland (RBS), whilst Spanish banking giant Banco Santander remains the front runner, having hired Credit Suisse to advise on its bid.

After it was revealed that any buyer would have to meet a funding shortfall, fears began to emerge that RBS would fail to attract enough potential buyers with pockets deep enough to acquire the network.

Nearly ?3 billion of financial support extended by the British central bank, the Bank of England would need to be refinanced by the buyer of the network, according to a memorandum that was sent to possible buyers last week.

Beyond the refinancing, any buyer would also be required to cover a funding shortfall at the branch network between deposits taken and loans disbursed, estimated to be as high as ?2 billion.

People who are familiar with the sale process say that most buyers had expected a funding shortfall, with the deal known for its complexity.

RBS expects to close the deal next year, and indicative bids for the branch network are expected to be delivered in April.

An unnamed source told Dow Jones that if RBS is unsatisfied with the price, it may postpone the entire sale.

Currently the European Union is requiring that the troubled lender, which is majority owned by the British government sell the branch network over the next four years, so that it does not have an unfair advantage over rivals who have not received government aid.

According to the report in Dow Jones, NAB, which owns both the Clydesdale and Yorkshire Bank’s in the UK continues to remain interested in the network, and may either table a standalone bid, or tie up with a private equity firm.

The source suggests however that NAB has approached a number of firms for a potential deal, but many firms have opted not to proceed as they seek less complex deals elsewhere.

The person, however, said the number of private-equity firms that NAB is in contact with is falling, as the firms focus on less-complex deals elsewhere.

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