UK Financial Investments (UKFI) is planning to sell about 6 per cent of placing shares in Lloyds Banking Group held by HM Treasury, marking the beginning of the bank’s privatisation process.
At the peak of financial crisis in 2008, the UK government pumped in £20.5bn into Lloyds. The placing is expected to comprise 4.28 billion of Lloyds’ ordinary shares.
With this sale, the Treasury’s shareholding in the banking group will be reduced from about 38.7 per cent to about 32.7 per cent.
UKFI has not disclosed details of the price and the number of placing shares.
HM Treasury, in a statement, said: “We want to get the best value for the taxpayer, maximise support for the economy and restore them to private ownership. The government will only conclude a sale if these objectives are met.”
The sale process is being kicked off in the wake of improvement in the banking group’s mortgage lending and share value, apart from anticipating that the group can start paying dividends from 2014.
Furthermore, UKFI and HM Treasury have agreed not to sell further shares in Lloyds for a period of 90 days following the completion of the sale of placing shares.
However, bankers anticipate that future sales may include an offering to private retail investors.
JPMorgan, Bank of America Merrill Lynch, UBS and Lazard are handling the sale.
BofA Merrill Lynch, JP Morgan Cazenove and UBS Investment Bank have been appointed as joint book-runners.
Lazard is acting as capital markets adviser, while Slaughter and May is acting as seller’s legal counsel to UKFI in respect of English law.
Based on Lloyds’ closing share price of 77.36 pence on Monday, the stake would be worth £3.3bn.
UKFI was created in November 2008 to manage the British government’s investments in the Royal Bank of Scotland (RBS), Lloyds and UK Asset Resolution (UKAR).