The UK Government on Thursday unveiled a plan to return NatWest-RBS to majority private ownership within a year.
The UK taxpayer still owns 54.7% of NatWest-RBS after spending £45 billion to bail out the bank 13 years ago at the height of the global financial crisis at roughly £5.02 per share.
NatWest Group shares are currently trading at around £1.96, making further substantial losses for the taxpayer very likely.
UK Government Investments Limited (UKGI) said it intends to sell up to “15% of the aggregate total trading volume in the company” over the duration of the plan.
That would equate to roughly £2 billion, analysts at Credit Suisse estimated.
UKGI and Her Majesty’s Treasury’s (HMT) said they will “keep other disposal options open, including by way of directed buybacks and/or accelerated bookbuilds.”
They added: “The decision to launch the trading plan does not preclude HMT from executing such other disposals that achieve value for money for taxpayers, including during the term of the trading plan.”
Ronan Dunphy, banking analyst at Goodbody, said: “This move will be welcomed by investors and should improve liquidity in the stock as well as reinforcing the government’s desire to reduce/exit its shareholding, even if the plan weighs on the share price over the next 12 months.
“If the market is judged to be able to digest the sell down without an uncomfortable price reaction, we wouldn’t be surprised to see (the government) seek to reduce its shareholding further.”
The UK Government’s “drip” sale process could allow NatWest to use its 10% share buyback authorization to buy shares in the open market to accelerate privatisation.
UKGI said in a statement: “UKGI today announces that it intends to sell part of Her Majesty’s Treasury’s (HMT) shareholding in NatWest Group plc over a term of twelve months through a prearranged trading plan that will be managed by Morgan Stanley & Co. International plc.
“Under the trading plan, Morgan Stanley will have discretion to effect a measured and orderly sell down of shares in the company on behalf of HMT.
“Although the trading plan has been entered into today, the earliest that sales will commence will be 12 August 2021, following the expiry of the lock-up period agreed with the bookrunners when HMT disposed of part of its shareholding in the company by way of an accelerated bookbuild on 11 May 2021.
“The trading plan will terminate no later than 11 August 2022.
“HMT has instructed Morgan Stanley that (a) its intention is that up to, but no more than, 15% of the aggregate total trading volume in the company will be sold over the scheduled duration of the trading plan, and (b) shares may not be sold under the trading plan below a price per share that UKGI and HMT determine represents fair value and delivers value for money for the taxpayer throughout the term of the trading plan.
“The actual number of shares sold on any day under the trading plan will depend on market conditions, among other factors.
“UKGI and HMT will keep other disposal options open, including by way of directed buybacks and/or accelerated bookbuilds.
“The decision to launch the trading plan does not preclude HMT from executing such other disposals that achieve value for money for taxpayers, including during the term of the trading plan.
“HMT currently owns 6,338,753,194 ordinary shares in the company, which represents approximately 54.7% of voting rights in the company.
“Goldman Sachs International is acting as privatisation adviser to UKGI. Freshfields Bruckhaus Deringer LLP is acting as legal counsel to UKGI in respect of English and US law.”