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Sun Capital falls out of Lloyds auction

by Laura Board | Published November 23, 2011 at 9:39 AM

Hugh Osmond's Sun Capital Partners Ltd. has exited the £1.5 billion-plus ($2.3 billion) auction for 632 Lloyds Banking Group plc branches and other assets, leaving bank acquisition vehicle NBNK Investments plc and Co-operative Financial Services Ltd. in the frame.

London-based Lloyds said Wednesday, Nov. 23, it would continue talks with two of three bidders, though it noted that it is still considering selling the assets through an initial public offering instead. A person familiar with the situation confirmed that the remaining bidders are NBNK, which was for weeks the sole offeror, and Co-operative Financial, and that Sun Capital's offer was rejected.

Lloyds managed to eke out offers from Co-operative and Sun Capital following weeks of discussions and funding concessions after the gap between the assets' deposits and mortgage book had initially deterred them.

Tim Tookey, who became Lloyds interim CEO earlier this month after Antonio Horta-Osorio unexpectedly took sick leave for exhaustion, reiterated that Lloyds will decide exactly how it sells the assets by year's end.

"We are very pleased with the level of interest and detail of the offers that have been made. We will now move quickly in parallel talks with each bidder," he said in a statement.

NBNK lost out to Virgin Money (UK) Holdings Ltd. on Friday in the auction for state-owned lender Northern Rock plc, which fetched up to £1.03 billion. NBNK listed on the Alternative Investment Market in August 2010, having raised £50 million on the understanding that its planned retail banking acquisition would entail a far larger, secondary fundraising. Reports have suggested it has about £8 billion in committed capital from institutional investors.

Co-operative Financial, based in Manchester, England, is Britain's largest mutual, owned by almost 6 million people. It has expanded its presence in financial services since merging the Co-operative Bank plc with the Britannia Building Society more than two years ago.

Under the terms of an agreement with the European Commission, Lloyds must dispose of the assets by 2013 to compensate for its bailout by the British government at the height of the financial crisis. The state still owns about 41% of Lloyds, where succession issues have pushed the share price down in recent weeks.

J.P. Morgan Chase & Co. and Citigroup Inc. are handling the Lloyds auction.

Cenkos Securities plc is advising NBNK. The Co-op's advisers are Credit Suisse Group, Barclays Capital and Linklaters LLP.

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Sun Capital falls out of Lloyds auction

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