JC Flowers and other private equity firms are showing interest in bidding for Lloyds’ TSB business, The Telegraph reported.
James Quinn of The Telegraph says Lloyds Bank’s chief executive would welcome a trade sale if it were to offer greater security.
TSB IPO Planned Next Year
Lloyds Bank was required to sell over 600 branches by European regulators for receiving a 20 billion pound government bailout during the 2008 financial crisis. Towards this, Lloyds Banking Group PLC (NYSE:LYG) (LON:LLOY) has rebranded the branches under TSB.
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Last week, UK Financial Investments Ltd, which oversees the government stake sale, indicated that it sold 4.28 billion shares of Lloyds Bank for £3.2 billion, thereby reducing the taxpayers’ stake to 32.7 percent.
Joseph Dickerson and team of Jefferies report the recent sale by UKFI is unequivocally positive for Lloyds Banking Group PLC (NYSE:LYG) (LON:LLOY). The research team feels the recent sale provide more optionality in RBS, which is only 12 percent below the government’s carrying value. The analysts note the recent sale is the first step toward triggering a virtuous circle of fundamental and technical factors, besides sending a systemic message a sale needs.
Lloyds has been priming TSB for an IPO in the middle of next year. The bank’s spokesman indicated that the bank is pursuing an IPO though the bank is open to any offer that would give greater value or certainty. Lloyds is using Citigroup Inc (NYSE:C) and JPMorgan Chase & Co (NYSE:JPM) to advise on TSB.
Other PE Firms Interested
James Quinn of The Telegraph notes Lloyds Banking Group PLC (NYSE:LYG) (LON:LLOY) had been due to sell TSB business to the Co-operative Group, but they mutually withdrew in April after discovering a £1.5 billion black hole in its own balance sheet.
However, James Quinn feels selling the TSB business rather than floating an IPO would potentially reduce the risk of market moving down before next summer.
James Quinn reports that along with JC Flowers, other private equity players such as New York-based private equity group AnaCap might be interested in some kind of trade sale. Incidentally, AnaCap has been working with The Blackstone Group L.P. (NYSE:BX) on a bid for RBS’ 315-branch “Rainbow” business.