March 24, 2023

DealBook: R.B.S. Raises $1.3 Billion in Listing of Insurance Unit

Insurance renewal notices from Direct Line in London.Suzanne Plunkett/ReutersInsurance renewal notices from Direct Line in London.

LONDON – The Royal Bank of Scotland stands to collect £787 million ($1.3 billion) through the initial public offering of its insurance unit Direct Line, which started trading on Thursday.

The share sale is part of a mandate from the European Union, which required British bank to offload the business as a condition of receiving a government bailout during the financial crisis.

Royal Bank of Scotland, which is still 81 percent owned by the British government, must sell its remaining stake in the business by 2014.

The Edinburgh-based bank said it had sold a 30 percent stake in Direct Line at 175 pence per share. Stock in the British insurance business, which started trading on a conditional basis, had risen 5.9 percent on Thursday.

The I.P.O is one of the largest so far this year in Europe and values the company at £2.6 billion. To access a larger pool of investors, retail shareholders were offered a roughly 15 percent allocation of Direct Line’s shares that were sold on Thursday.

The ongoing European debt crisis has made it difficult for companies to raise money through I.P.O.’s. Earlier this year, the Dutch cable operator Ziggo and the Swiss logistics company DKSH raised a combined $2 billion.

Since then, several companies, including the German chemicals company Evonik, have postponed their European listings because of the uncertainty economic climate.

Last month, Direct Line announced plans to cut almost 900 jobs from its 15,000 workforce as it looked to reduce costs. The insurer said the layoffs were part of a £100 million annual cost-cutting plan for the next two years.

Morgan Stanley, Goldman Sachs and UBS are working on the I.P.O.

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DealBook: After $10 Billion I.P.O., Glencore Shares Rise

Shares of the Swiss commodity trader Glencore rose on Thursday in their first day of trading in London after a $10 billion initial public offering, the biggest this year.

Glencore sold 1.14 billion shares at £5.30 ($8.60) apiece, the company said in a statement. Investors include BlackRock, JPMorgan Chase and the sovereign wealth fund of Abu Dhabi. Glencore’s chief executive, Ivan Glasenberg, remains the company’s single largest shareholder with a 15.7 percent stake.

The share price was set at the middle of the price range announced earlier this month, valuing the company at $59.2 billion. The shares hit a high of £5.53 before retreating to £5.41 in early afternoon trading in London, still 2.2 percent above the opening price.

Glencore’s shares were also sold on the stock exchange in Hong Kong. Demand for the shares “significantly” exceeded the amount available, Mr. Glasenberg said.

“We welcome and look forward to building long-term mutually beneficial relationships with our new shareholders, as we have with our customers, suppliers and capital partners over the years,” Mr. Glasenberg said.

In going public, Glencore is giving up some of the secrecy that analysts say has helped it become one of the biggest traders of physical commodities, with operations in more than 40 countries. The share sale provides Glencore with cash as well as publicly traded shares it can use to pay for acquisitions.

Glencore was founded in 1974 by Marc Rich, an oil trader who later fled the United States for Switzerland because of tax evasion charges. Mr. Rich sold the company to a group of managers, including Mr. Glasenberg, in 1993 for about $600 million.

The shares started trading in London on Thursday on a conditional basis before being officially added to the London Stock Exchange on Tuesday, and in Hong Kong a day later.

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