Abu Dhabi In Talks To Purchase $16b Stake in RBS

March 28, 2012Bankingby EW News Desk Team

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The UK media has reported that the Gulf state is interested in purchasing a £10 billion ($16 billion) stake in the bailed-out Royal Bank of Scotland. According to sources contacted by the media, the discussions have been held regularly over the past three years.

The news, first reported by the BBC on Monday, suggested the sale was likely to be loss-making, as RBS shares currently trade at a much lower price than what the UK government paid in the 2008 bailout.

Abu Dhabi sovereign wealth funds are reportedly looking at a 30 percent stake in the bank, a share that the Financial Times reckons could be worth almost £10 billion.

In 2008, the UK government used £45.5 billion in taxpayer money to prevent the bank from collapsing after its disastrous takeover of ABN Amro. The UK government owns an 82 percent stake in RBS.

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Rumours of the possible sale saw RBS’ share jump 4.1 percent yesterday.

However, the Treasury has strongly denied reports that the government was looking to sell part of its majority stake to a Gulf nation, or any sovereign wealth fund for that matter.

In a statement, the Treasury said:

The aim is to repair and return RBS to full health so that it is able to support the U.K. economy in the future, and the current strategy is working to achieve that. The government's policy has always been to return RBS to the private sector, but only when it delivers value for money for the taxpayer.

However, Reuters is now reporting that the government of Abu Dhabi is directly involved, rather than its investment vehicles, and have engaged the services of Amanda Staveley, a banker known for her powerful Middle-East connections. In 2008, Staveley was instrumental in Abu Dhabi royal Sheikh Mansour bin Zayed al-Nahayan’s investment in Barclays, helping it avoid a government bailout.

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A senior banker also told Reuters that the sale was happening at a much higher level, most likely at a “government-to-government” level.

Abu Dhabi Investment Authority, the world’s largest sovereign wealth fund, declined comment on whether it was involved in discussions with RBS.

Gulf investors, historically, have a penchant for British assets, often investing in London’s prized real estate. Sheikh Mansour, himself, is the owner of the Manchester City Football Club, and owns a 32 percent share in Richard Branson’s Virgin Galactic.

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