Direct Line, Churchill, Green Flag and Privilege Shares To Be Offered To Private Investors

RBS To Float Shares In Direct Line Group

Private investors will get the chance to buy shares in some of the biggest household names in insurance after RBS announced it will put its insurance arm on the stock market.

The 80% state-owned bank is being forced to sell its interest in the Direct Line Group, which includes the Direct Line, Green Flag, Chuchill and Privilege brands, under a European-imposed condition of the £45bn bailout it received in 2009.

Approximately a quarter of the Direct Line Group will be offered in the initially towards the end of 2012, with additional tranches to follow next year and in 2014.

However, the Telegraph reported the arm could still be sold - Andy Haste, the former chief executive of RSA Group, known to be leading a private equity consortium looking to bid for Direct Line.

The Telegraph believes Haste is working with private equity firms Blackstone, Bain and Advent.

Analysts have placed the value of the Direct Line Group at between £2.8bn and £4bn.

Stockbroker Redmayne-Bentley has been appointed as one of the intermediaries through which private investors can register for and apply for shares.

Its head of operations, Tim Archer, said: “Following today’s announcement, we are pleased to see that private investors will be able to apply for shares, as part of the proposed IPO, in a company that owns familiar household names such as Direct Line, Churchill, Green Flag and Privilege, amongst others."

Shares will also be offered to institutional investors - such as pension funds.

RBS said in a statement: "Direct Line was launched more than 25 years ago as a pioneer of direct motor insurance and it has grown to become the market leader in UK personal lines insurance.

"We believe it has a strong future as a standalone insurance group continuing to serve its customers well while delivering attractive returns to investors"

There are question marks over whether there will be enough interest for the initial public offering however - IPOs have not been popular since the start of the recession with several high profile floatations falling flat or failing to make it to market in recent years.

Many investors will still remember the Ocado floatation - two years ago the groceries company launched its IPO and suffered immediate share price drops after large investment banks and hedge funds claimed it was overpriced.

On the two year anniversary, the company’s share price was trading at 76.6p; 57.22% below its original offer price.

The government has been looking into ways to make IPOs easier for the market - currently FTSE companies have to offer at least 25% of their shares for an IPO, compared to just 10% for companies listed on the American stock exchange Nasdaq.

Bloomberg reported in August 2012 that Rohan Silva, who advises Prime Minister David Cameron on technology, said after meeting with entrepreneurs and investors that the UK is looking into adopting elements of the US structure, including "relaxing rules on equity listings”.

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