British lender Royal Bank of Scotland Group plc (RBS, RBS.L) said Tuesday that it plans to sell a further 15.3 percent stake in Direct Line Insurance Group plc (DLG.L) through a placing of shares to institutional investors. The sale will reduce RBS's stake in the insurance company to less than 50 percent.
RBS expects to sell to institutional investors 229.4 million Direct Line Group ordinary shares excluding an over allotment option, equivalent to 15.3 percent of Direct Line Group's ordinary share capital. The company will sell a further 22.9 million shares if the over allotment option is exercised in full. Based on Direct Line's closing stock price of 210 pence on Tuesday, the sale of 229.4 million shares is valued at around 482 million pounds.
RBS said in a statement, "The offer price will be determined by means of an accelerated bookbuild offering process which is to start immediately."
If all the Direct Line Group ordinary shares are sold and assuming no exercise of the over-allotment option, RBS's remaining stake in Direct Line would comprise 749.9 million shares, equivalent to a 49.99 percent stake. If the over-allotment option is exercised in full, RBS's remaining stake would comprise 726.9 million shares, equivalent to a 48.5 percent stake.
Goldman Sachs International, Morgan Stanley Securities Limited and UBS will act as joint book runners and placing agents in relation to the offering.
As a condition to receiving state aid, RBS had committed to the European Commission in 2009 to undertake certain measures including the disposal of its interest in Direct Line Group. To comply with this requirement, RBS had to cede control of Direct Line Group by the end of 2013 and must divest its entire interest by the end of 2014.
In mid-October 2012, RBS sold a 30 percent stake in Direct Line through an initial public offering at 175 pence per ordinary share, raising 787 million pounds.
Direct Line was launched more than 25 years ago as a pioneer of direct motor insurance. It is a retail general insurer and has leading market positions in the U.K.
Direct Line operates under brands such as Direct Line and Churchill. It is comprised of five primary segments: motor, home, rescue and other personal lines, commercial and international.
RBS closed Tuesday's trading on the NYSE at $9.15, up $0.15 or 1.67 percent on a volume of 555,,858 shares.
DLG.L closed Tuesday's trading on the London stock exchange at 210.22 pence, down 0.08 pence or 0.04 percent.
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