Royal Bank of Scotland to Pressurize Partners for Share Boost

The Royal Bank of Scotland (RBS) will embark on a major drive to increase its share price this week, aiming to secure control of the National Westminster Bank (NatWest). Analysts suggest that the Edinburgh bank may require its partners, British insurer CGU and Spanish bank BSCH, to buy shares on the open market to ensure the bid does not suffer from being undervalued. This comes as NatWest shareholders are likely to reject the RBS bid unless the share price of the Edinburgh bank rises to match the rival bid from Bank of Scotland.

Key Takeaways:

• The Royal Bank of Scotland's share price is currently at #12.08, which is lower than the required level of #15.01 needed to convince NatWest shareholders to accept the bid.
• Analyst Alison Galbraith suggests that RBS may put pressure on its partner CGU to buy shares in the market earlier than planned, as the current share price of RBS is not sufficient to meet the requirements of the bid.
• The Royal Bank has been looking for a new life insurance partner since June, following the decision of its former partner Scottish Widows to be acquired by Lloyds TSB.
• CGU has stepped in as a new partner and will take a 50% stake in Royal Scottish Assurance for #150 million, as well as a 50% stake in NatWest Life once the acquisition of NatWest is complete.
• RBS's unofficial offer for NatWest stated that CGU intends to increase its holding in RBS through the purchase of ordinary shares with a value of up to #300 million in the market over the next six months.

Statistics:

• RBS's current share price is #12.08.
• The required share price for the RBS bid to be accepted is #15.01.
• RBS's bid for NatWest is worth #14.74 per share.
• CGU will buy 50% of RBS's life insurance subsidiary Royal Scottish Assurance for #150 million.
• The planned investment by CGU in RBS will be up to #300 million over the next six months.

Sources:

• "Byline: Ian Fraser" (The Scotsman)
• BoS bid starts takeover clock ticking (Page 18)