RBS shuts out buyout firms from £7bn insurance sale

The UK bank has ruled out financial sponsors as bid candidates for its sale of insurance assets such as Direct Line and Churchill. The bank is thought to be worried about buyout firms’ ability to finance such a bid.

Private equity firms were ruled out of the first round of bidding for RBS’ £7 billion (€8.8 billion; $13.6 billion) insurance assets, according to a source at a large buyout firm. The bank has only sent sales memoranda to targeted trade buyers.

Buyout firms have yet to succeed in a bid of this size in 2008. The largest buyout agreed so far is First Reserve’s take-private of CHC Helicopter for C$3.7 billion ($3.6 billion, €2.5 billion).  The source said a deal the size of the RBS disposal was unlikely to be a realistic target for private equity firms.

TPG Capital had expressed an interest in the insurance assets, according to a source close to the buyout firm. Other interested bidders included Apax Partners, Kohlberg Kravis Roberts and The Blackstone Group, according to Financial Times, a UK newspaper.

RBS said it would be disposing of its insurance assets which include Direct Line and Churchill when it launched a £12 billion rights issue last month.

RBS declined to comment.