My honourable friend the Economic Secretary to the Treasury (John Glen) has made the following Written Ministerial Statement.
I can today inform the House of the disposal of £1.1bn worth of government-owned NatWest Group plc (NWG, formerly Royal Bank of Scotland, RBS) shares, representing 5% of the company, by way of an overnight sale via a competitive accelerated book build (ABB) to institutional investors. The government’s remaining shareholding represents 54.8% of the company.
Rationale
It is government policy that where a government asset no longer serves a public policy purpose, the government may choose to sell that asset, subject to being able to achieve value for money. This frees up public resource which can be deployed to achieve other public policy objectives.
The government is committed to returning NWG to full private ownership, given that the original policy objective for the intervention in NWG – to preserve financial and economic stability at a time of crisis – has long been achieved. The government only conducts sales of NWG shares when it represents value for money to do so and market conditions allow. This sale represents a further step forward for government in exiting the assets acquired as a result of the 2007 to 2008 financial crisis.
Format and Timing
The government, supported by advice from UK Government Investments (UKGI), concluded that selling shares by way of a competitive ABB process to institutional investors represented value for money for the taxpayer. The sale involved wall-crossing, an established market procedure designed to improve the chances of reaching the widest possible range of investors, executing successfully and achieving the best price for the taxpayer. Wall-crossing is commonly used in transactions of this sort and involves contacting a number of institutional investors hours before the transaction launch on a confidential basis to give them more time to consider participating in the sale and to provide UKGI with feedback which can be used to optimise the offering. The institutions were selected on the basis of objective criteria and do not receive preferential treatment in the allocation. UKGI intends to keep disposal options under review and will continue to consider further transaction options that achieve value for money for the taxpayer.
ABBs are a well-established method of returning government-owned shares to private ownership, while protecting value for the taxpayer. The first two sales of NWG shares were completed by way of ABBs (in August 2015 and June 2018), and this method was also used in the sell-down of the government’s stake in Lloyds Banking Group.
This is the fourth sale of NWG shares undertaken by the government, following previous disposals in August 2015, June 2018 and March 2021.
The sale concluded on 11 May 2021, with institutional investors purchasing a limited number of government owned shares. A total of 580m shares (5% of the bank) were sold at the price of 190p per share. This represented an 3.6% discount to the 10 May 2021 closing price of 197.05p. A small discount to market price is necessary and expected in a market facing sale of such a large volume of shares overnight. UKGI's view, having taken advice from their privatisation adviser, Goldman Sachs, and their capital markets adviser, Rothschild & Co, is that the final price achieved in the transaction represents fair value, based on the current and future prospects of NWG, and that the transaction achieved value for money for the taxpayer. Following this transaction, the government’s shareholding will stand at 54.8%.
Details of the sale are summarised below:
Government stake in NWG pre-sale | 59.8% |
Total shares sold | 580 million |
Sale price per share | 190.00p |
Share price at market close on 10/05/2021 | 197.05p |
Discount to close price | 3.6% |
Total proceeds from the sale | £1,102 million |
Government stake in NWG post-sale | 54.8% |
Fiscal impacts
The net impacts of the sale on a selection of fiscal metrics are summarised as follows:
Metric | Impact |
Net sale proceeds | £1.1 billion |
Retention value range | Within the valuation range |
Public Sector Net Borrowing | Uncertain There may be future indirect impacts as a result of the sale. The sale proceeds reduce public sector debt. All else being equal, the sale will reduce future debt interest costs for government. The reduction in government’s shareholding means it will not receive future dividend income it may otherwise have been entitled to through these shares. |
Public Sector Net Debt | Reduced by £1.1 billion |
Public Sector Net Financial Liabilities | Increased by £40.9 million |
Public Sector Net Liabilities | Increased by £40.9 million |
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