The National Australia Bank today formally decided to proceed with the demerger and IPO of its troubled UK business, the Clydesdale Bank.
The business is worth somewhere between $3.4 billion and $4 billion depending on the earnings multiple to be decided. Three-quarters of the shares will be available to NAB shareholders and the rest to institutions.
Detailed information with the scheme details is expected to be released in the week starting December 7.
The float is part of the NAB’s strategy to get rid of non-performing assets and concentrate on the business in Australia and New Zealand.
The UK announcement follows the completion of the sale of the final holding in the Great Western Bank in the US, the $2.4 billion sale of 80% of the insurance business and the sale of most of the NAB’s commercial real estate portfolio.
The IPO, with a primary listing on the London Stock Exchange, will happen in February, with the price set for each shares sometime early that month.
UK authorities require capital support of £1.7 billion ($A3.6 billion) to cover any future claims against the business for “miss-selling” insurance products to small businesses.
This was part of the reason why NAB raised $5.5 billion this year, the biggest capital raising in Australian company history. (The other reason is to meet stricter capital rules designed to make Australian banks safer from any future financial crisis.)
The bank needs to be holding the cash to partly to meet UK regulatory requirements for potential compensation costs to customers who were wrongly sold financial products.
“The proposed demerger and IPO remain subject to a range of matters, including various court and regulatory approvals and NAB shareholder approval,” the bank said today.
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