The U.K. government has formally kicked off its search for a
suite of investment banks to run the privatizations of Lloyds
Banking Group PLC (LYG) and Royal Bank of Scotland Group PLC
(RBS).
UK Financial Investments, the body which manages the U.K.'s
stakes in Lloyds and RBS, invited investment banks to begin
pitching for places on the sell-downs. Robin Budenberg, the UKFI
chairman, is leading the tender process, according to one person
familiar with the matter.
Within the pitch documents, available on the UKFI website, four
separate tenders have been announced: bookrunner, co-lead manager,
capital markets adviser; and financial and/or strategic
adviser.
Two senior European equity capital markets bankers said they had
received the tender Thursday.
A person familiar with the matter said the U.K. government was
looking to refresh its options ahead of the Lloyds and RBS
privatizations. The successful banks in the tender process would
form part of a panel of banks suitable to handle the sell-downs,
the person added.
Deutsche Bank AG (DB) was the last investment bank to handle a
privatization of a financial institution for the U.K. government
when it handled the sale of Northern Rock to Sir Richard Branson's
Virgin Money late last year.
The UKFI pitch comes at a time of continued turmoil at RBS and
disruption at UKFI. On June 12, RBS Chief Executive Stephen Hester
announced he would be stepping down from the bank at the end of the
year.
The Parliamentary Commission on Banking Standards report,
published last week, urged the government to wind down the UKFI,
stating that continued government interference "has interfered in
the running of the two partly state-owned banks." George Osborne,
the U.K. Chancellor of the Exchequer, declined to back the
recommendation in a speech at the Mansion House last week.
In April, Jim O'Neil, the head of UKFI, announced his departure.
He is set to move back to former employer Bank of America Merrill
Lynch in the autumn.
One capital markets banker said: "It is a very surprising time
to be issuing a tender."
A person familiar with the matter said that O'Neil wasn't taking
part in the search process. The person said that the invitation
didn't mean share sales were imminent.
The Chancellor used his annual Mansion House address to announce
that the U.K. government was taking its first steps to return
Lloyds to the private sector and is now "actively considering
options for share sales".
He added that the first sale is likely to be an institutional
offer, but for subsequent disposals the government would consider a
variety of options, including a retail offering.
Osborne also said that a sale of RBS was "some way off". He
added: "I don't want a quick sale of our RBS shares. I want the
right sale--the right sale for the British people."
A statement from UKFI said: "UKFI is launching a process to
establish a Framework Agreement for the supply of Specialist
Financial Services. Prospective suppliers are invited to complete
and return the Invitation to Tender by 8 July 2013. It is from
these Panels that UKFI would expect to make appointments to assist
it in any future transactions involving HM Government's
shareholdings in Lloyds and RBS."
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