(Adds Babcock & Brown and analyst comment.)
By Michael Carolan
Of DOW JONES NEWSWIRES
LONDON -(Dow Jones)- Royal Bank Of Scotland Group PLC (NYSE:RBS) (RBS.LN) confirmed Friday it has sold its U.K. train leasing company Angel Trains to a consortium led by Babcock & Brown Ltd. (Australia:BNB) (BNB.AU) for GBP3.6 billion including debt.
The U.K. bank said the sale is part of its strategy of focusing on its core domestic and international banking businesses.
Angel trains provides rolling stock to train operators across the U.K. and continental Europe. RBS said the deal would complete before the end of 2008 subject to antitrust clearance, while Simon Gray, Babcock & Brown's head of European infrastructure M&A told reporters that the deal was expected to complete in the course of the summer.
The unit was sold to a consortium comprising Australia's second-largest investment bank Babcock & Brown, Deutsche Bank AG (NYSE:DB) (DB), AMP Capital Investors, a division of AMP Ltd. (Australia:AMP) (AMP.AU), and funds advised by Access Capital Advisers.
Earlier this week, RBS announced the successful completion of its GBP12 billion rights issue, the largest ever, with 95.1% of shareholders subscribing. The remaining shares were placed by Monday afternoon.
The company has suffered capital depletion after its GBP10 billion acquisition of ABN Amro assets, as well as from value deterioration of mortgage and other securities.
The deal did little for RBS shares Friday. By 0722 GMT, they were trading unchanged at 229 pence in a lower London market. The shares have lost more than half their value in the last year.
Shore Capital analyst Danny Clarke said he expected further disposals in the months ahead, including RBS Insurance and the bank's 50% stake in its personal finance joint venture with U.K. retailer (TSCDY). Clarke expects a combined GBP4 billion of additional capital to be raised.
Shareholders in Babcock & Brown were less than impressed with the deal. The shares fell by more than 30% Friday on concerns about its resulting debt position. B&B's Gray said the deal would not be affected by the drop in the group's shares.
Gray described the deal as one of largest acquisitions in recent months - " probably since the credit crunch started last year."
The sale process began in September last year, with the winning consortium nominated as exclusive bidder in early February. Gray said the consortium was " very, very happy with the investment and with the price paid."
The enterprise value of GBP3.6 billion is largely made up of debt. RBS wouldn't specify how much it would make from the deal but analysts estimate it could be as little as GBP250 million.
Gray said the debt had been taken on by a group of 17 lenders in a structured package that had taken six months to put in place. "We brought in a large number of institutions to eliminate uncertainties of underwriting in this market," he said.
Gray said that Angel was set to benefit from a strong future, with continued rail growth in the U.K. and "explosive growth in Europe." Angel's management team will be retained
Company Web site: http://www.rbs.com
-By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278; michael.carolan@ dowjones.com
(END) Dow Jones Newswires 06-13-08 0350 Copyright (c) 2008 Dow Jones & Company, Inc.
