Seven bidders tipped to join RBS auction

Private equity firms accused of 'mischief making' in run-up to sale of insurance arm
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The Independent Online


Advisers to Royal Bank of Scotland (RBS) are thought to have whittled down a list of interested bidders for its £6bn insurance business to seven parties ahead of the first-round auction deadline on Wednesday.

The list does not include any bids from private equity firms, which have been excluded from making offers by advisers Goldman Sachs and Merrill Lynch over concerns they would be unable to raise sufficient cash.

Front-runners for the unit, which owns well-known British brands such as Churchill and Direct Line, are thought to include the trio of European insurance heavyweights: Switzerland's Zurich, Italy's Generali and Germany's Allianz group.

A City source said: "There is a lot of mischief-making going on by the private equity groups that have been frozen out. It's not helpful. I think there are seven firms on the list, but out of those, three can immediately be discounted as no-hopers from the off."

The US investment guru Warren Buffett revealed last week that he would not be pursuing RBS Insurance after speculation surfaced that he could mount a bid through his Berkshire Hathaway company. Aviva, the UK's biggest insurer, ruled itself out last month.

Interested private equity houses frozen out are believed to have included Apax Partners and Kohlberg Kravis Roberts.

Wildcards in the process could come from China, with RBS's joint venture partner in the region, Bank of China, and the People's Republic's insurance giant Ping An possibly in the initial running.

Meanwhile, Tesco boss Sir Terry Leahy, fresh from striking a £1bn deal to buy 36 Korean hypermarkets earlier this month, could be poised to part with the same amount of cash once again to secure RBS's 50 per cent stake in its Tesco Personal Finance joint venture. The supermarket giant set up its venture with RBS in 1997; it is thought it can gain overall control, with services currently provided by RBS outsourced on a contractual basis.

RBS is also believed to be ready to sell its 50 per cent stake in Linea Directa, an insurance joint venture with Spain's Bankinter.

In another insurance deal, Friends Provident, which is selling off divisions as part of a restructuring programme, is believed to have entered into exclusive talks with a UK-owned trade buyer for Pantheon, the wealth manager it bought for more than £17m in July last year. The deal is thought to be worth about £30m and could be announced as early as Friday if discussions progress as quickly as expected.

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