Royal Bank of Scotland Group is to sell its aviation unit to Sumitomo Mitsui Financial Group of Japan for $7.3 billion (£4.7bn), the bank confirmed last night.
The deal, which will be announced to the stock market today, marks the end of a fierce auction that saw Sumitomo Mitsui pitted against China Development Bank Corporation in the final stages.
Sumitomo Mitsui fended off competing offers from the Chinese bank and US banking group Wells Fargo to buy the business from RBS, which is 82%-owned by the UK Government.
It is believed that Sumitomo Mitsui became the leading bidder after concern grew that state-owned China Development Bank would struggle to gain Government approval for a purchase in a timely manner.
At $7.3bn, the disposal will be Royal Bank's biggest since it received a £45.5bn Government bail-out during the 2008-09 financial crisis, the biggest bank rescue in the world. Royal said last night that it expected the sale would be completed before the end of the third quarter.
Royal Bank's aviation business is one of the biggest plane lessors after General Electric's Gecas and AIG's International Lease Finance Corporation.
Earlier, shares in Royal Bank nudged up 1.33% after reports that it was in talks about selling its mergers and acquisitions (M&A) arm in the Middle East.
The stock finished up 0.32p at 24.42p as details on plans to overhaul its investment bank began to emerge.
Simon Penney, RBS chief executive for Middle East and Africa, told Reuters that the M&A business was being sold.
The division, which has offices in Abu Dhabi and Dubai, had been working on four M&A deals in the region, including The Coca-Cola Company taking a 50% stake in Saudi Arabia based drinks business Aujan Industries for £639m.
Mr Penney added: "It is a global decision to exit cash equities and M&A. We had some pretty good mandates live and we'll see all deals closing. We will honour all client obligations but we won't be originating any new business."
Reuters suggested a sale could be done in the next few months, with up to five parties having expressed an interest.
The decision to offload its M&A arm is part of RBS's plans to cut thousands of jobs from its investment bank and knock £120bn off its balance sheet in the next three years. Around 3500 jobs are at risk around the world in the global markets division.
Lazard has been appointed to find buyers with Commonwealth Bank of Australia, Bank of China, ANZ, DBS Bank, Mizuho Financial, Oriel Securities and Royal Bank of Canada all understood to have expressed interest in parts of the RBS empire.
Senior staff are also looking into the potential for management buy-outs at certain parts of the business. Other reports suggested Royal may want to wrap up sales of the businesses ahead of interim results in February but the bank would not comment on the speculation.
The restructured investment bank will focus on fixed income, foreign exchange, debt financing, transaction services and risk management.
Chief executive Stephen Hester has sold or wound down more than £160bn of assets since taking over from Fred Goodwin.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article