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U.K. to Speed Sale of $17 Billion NatWest Stake by Trading Plan

·3-min read

(Bloomberg) -- The U.K. government will sell more of its 12.5 billion-pound ($17 billion) stake in NatWest Group Plc over the next year, potentially returning the bank to majority private ownership for the first time since the financial crisis.

U.K. Government Investments Ltd., the body that oversees state holdings, said sales on the open market could start as early as Aug. 12 and will end no later than Aug. 11, 2022, according to a statement Thursday. No more than 15% of the aggregate total trading volume in NatWest will be sold over the duration of the pre-arranged trading plan.

The shares won’t be sold below a price that the government sees as “fair value and delivers value for money for the taxpayer throughout the term of the trading plan,” according to the statement. The Treasury will continue to keep other disposal options open, including directed buybacks and accelerated bookbuilds, as it looks to speed its selldown.

The U.K government is currently NatWest’s biggest shareholder with a 54.7% stake, more than a decade after it rescued what was then Royal Bank of Scotland in a 45.5 billion-pound ($62 billion) bailout. The Treasury is likely to take a hefty loss on the sales with the share price hovering around 200 pence. It has previously indicated its break-even price on the sums injected into the bank is 407 pence.

The Conservative government has repeatedly pledged to cut the holding, which once stood at more than 80%, but the process has been stalled as Brexit dominated the British political scene and the lender’s market value languished.

Shares in NatWest fell as much as 2.8% before recovering in early trading Thursday. They are up about 18% so far this year, after a 30% drop in 2020.

The bank declined to comment on the plan, which could mark an end to more than a decade of NatWest being majority owned by the government, though the U.K. would still remain by far the largest shareholder.

“The enormous decrease in NatWest’s share price since the bailout would mean that we’re getting less than half what we paid for it,” said Simon Youel, head of policy and advocacy at campaign group Positive Money. “Instead of selling at a loss, the government should take advantage of its stake in NatWest to make the bank work in the public interest.”

‘Drip’ Process

This “drip” sale process could allow NatWest to use its existing 10% share buyback authorization to purchase shares in the open market, which previously would have effectively increased the Treasury’s shareholding, Jefferies analyst Joseph Dickerson said in a note.

The sale is the latest move by the U.K. to reduce its stake, which stood at 62% at the start of the year. The Treasury said in May it was selling a 5% stake through an accelerated bookbuild, having reduced its stake to about 60% in March by selling 1 billion pounds worth of shares back to the bank.

What Bloomberg Intelligence Says:

The U.K. government’s plan to sell down more of its 54.7% stake in NatWest Group over 12 months from Aug. 12 is positive, given the desire to release the lender from state ownership, but will likely cap share performance -- potentially around the 190 pence level, we believe. Details are limited, adding to uncertainty.

-- Jonathan Tyce, BI banking analyst

The trading plan will be managed by Morgan Stanley. Goldman Sachs Group Inc. is acting as privatization adviser to UKGI and Freshfields Bruckhaus Deringer LLP is acting as legal counsel.

(Updates with details throughout.)

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