Higginson Attacks RBS After Branch Sale Delay

The FTSE-100 chairman who led a failed bid for more than 300 Royal Bank of Scotland (LSE: RBS.L - news) (RBS) branches has criticised the lender after the latest in a string of delays to the network's disposal.

Speaking to Sky News, Andy Higginson, who assembled a consortium of top City investors to acquire Williams & Glyn (W&G) in 2013, said the RBS board "must rue the day" that his offer was rejected.

Technology issues have plagued the separation of W&G from RBS, with the bank's chief executive, Ross McEwan, recently describing the project as "the most complex I've seen anywhere in banking in the world".

State-backed RBS said last week that a deadline of the end of 2017 imposed by Brussels may now be missed, with the cost "now likely to be significantly greater than (the £1.7bn) previously estimated".

The delay has raised fresh questions about the wisdom of a deal struck in 2013 by RBS's board which sees a consortium including two private equity firms and the Church Commissioners for England receiving multimillion pound payments each year.

A bond raised three years ago is due to convert to equity if W&G floats on the stock market, with the consortium which edged out Mr Higginson's takeover bid already earning a handsome coupon on their £600m investment - some of which was borrowed.

"I'm sad to see that the Williams and Glyn sale process has been delayed yet again," Mr Higginson, who now chairs Wm Morrison, the supermarket chain, said.

"The RBS board must rue the day they rejected the £1.3bn cash bid from blue-chip UK institutional shareholders.

"It (Other OTC: ITGL - news) still remains a mystery as to why, having turned down that bid, RBS didn't handle the IPO themselves, as they did with Direct Line (Other OTC: DIISD - news) and Citizens (NYSE: CIA - news) , or as Lloyds did with TSB."

Mr Higginson, a former finance director of Tesco who also chaired the supermarket's banking operation, said it was valid to ask why private equity investors had been brought in ahead of W&G's separation.

"Given the further delays, and the public stake in RBS, it seems reasonable to ask the board for the details of the deal with Corsair, Centerbridge and their partners, and an explanation of what they have done for the near-20% return on their investment that RBS is reportedly paying them,"‎ Mr Higginson added.

RBS has declined to provide further details of the financing arrangements with the consortium beyond those which were publicly disclosed at the time of the transaction.

The bank said last week that "the complexities of Williams & Glyn's customer and product mix (mean that) the programme to create a cloned banking platform continues to be very challenging and the timetable to achieve separation is uncertain".

"RBS is exploring alternative means to achieve separation and divestment," it added, without clarifying details of those alternatives.

The latest delay may spell the end of its original plan to float the branch network as a standalone business on the stock exchange, and will further postpone the date at which RBS can resume paying dividends to ordinary shareholders.

Its decision to strike a deal with the Church-backed consortium was partly designed to persuade stakeholders that RBS was committed to establishing a genuine challenger bank which could compete effectively.

A previous effort to sell W&G's 300 branches to Santander UK (LSE: 44RS.L - news) collapsed in 2012 after the Spanish-owned lender became frustrated with ongoing IT issues relating to the separation.

Santander UK and Virgin Money were two of the parties indirectly referred to in a statement issued by RBS last December which referred to "a number of informal (takeover) approaches" for W&G.

W&G has 1.8 million customers, including a significant presence in the small business banking market.

The expected failure to meet the latest deadline means the Government may have to return to the European Commission to try to negotiate a further extension - a discussion which could be complicated by the outcome of next month's referendum on EU membership.