Financial News

  • 6 June 2014, 9:38

Activist Snares Aviva Stake For Lloyds Push

An investor in the vehicle which lost out in the auction of 630 Lloyds Banking Group branches is increasing its stake in a bid to pursue legal action against the state-backed lender.

Sky News understands that Crystal Amber, a fund manager, has agreed a deal that will involve it acquiring control of Aviva Investors' 10.5% shareholding in NBNK Investments.

The transaction, which will be effected by exchanging Aviva's NBNK shares for equity in Crystal Amber, is likely to be disclosed to the London Stock Exchange on Friday.

Based on previous public disclosures, the trade will give Crystal Amber control of approximately 17% of NBNK, putting it in a powerful position to agitate for the company's board to sue Lloyds over the branches auction.

NBNK lost out to the Co-operative Group in 2012 despite claiming that its offer represented greater value and certainty for Lloyds shareholders.

The Co-op's takeover of the network collapsed last year amid its own financial crisis, leading to Lloyds' recent confirmation that it would float the branches under the TSB name in the coming weeks.

Sky News revealed Crystal Amber's determination to pursue Lloyds through the courts last December.

City insiders said on Thursday that top NBNK investors had lined up Stewarts Law, a firm which specialises in shareholder litigation, to act for them.

Stewarts is also representing a group of Royal Bank of Scotland shareholders who allege that they were misled when they participated in a 12bn rights issue in 2008.

NBNK spent roughly 30m of the 50m it raised from City institutions to assemble a bid for the Lloyds branch network, which was given the codename Project Verde.

None of NBNK's shareholders, including Crystal Amber, would comment on a prospective legal action against Lloyds or the Government.

The prospects of a successful legal action are unclear, since NBNK would have to demonstrate a form of misrepresentation by Lloyds, its advisers or the Government.

However, they are understood to have been encouraged by allegations that the outcome of the branches auction was influenced by a desire from the Treasury to see a mutually-owned organisation emerge as a more powerful player in Britain's high street banking sector.

"This was not a level playing field. That has become clear," one NBNK investor told Sky News in December.

"NBNK has paid 30m to compete in an auction it had no chance of winning."

"Whilst the legal test is a substantial one, it was always felt that the Verde process was heavily geared towards the Co-op's success," another investor said last year.

Lord Levene, the former NBNK chairman, told MPs in January that Lord King, the then Governor of the Bank of England, had hinted at ministerial bias in the sale process.

Lord King subsequently denied that that had been his view.

NBNK is now chaired by Wilbur Ross, the powerful Wall Street investor, who has been trying to use the vehicle as a platform for a separate acquisition.

Lloyds, Crystal Amber and Aviva all declined to comment.

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