Fierce takeover battle looms for RBS's insurance arm

A fierce takeover battle is set to erupt over Royal Bank of Scotland's insurance business, as more than 15 companies expressed interest in a bid, with more expected to emerge in the coming weeks.

A source close to RBS said: "About 15 companies have registered their interest in bidding. All the insurers are looking at this, as are all the private equity houses, and [there is] some interest from Asian buyers as well."

The insurance arm, which owns businesses including Churchill and Direct Line, has become one of the most sought-after assets in recent years after it was put up for sale by Royal Bank of Scotland last week.

Britain's second-biggestbank announced at the timethat it had received a number of expressions of interest inthe business.

RBS is looking to sell all or part of the business to help to boost its capital by £4bn alongside its record £12bn rights issue.

Sir Fred Goodwin, RBS's chief executive, has insisted that there will be no fire sale of the business, which RBS started from scratch about 20 years ago.

The valuation range of the interested parties is between £6.5bn and £7.5bn, and it is understood that RBS would resist any offers of under £6bn. "RBS won't be held to ransom," the source said.

The process is still at an early stage, and the company is yet to even send out information memorandums.

Names that have alreadybeen linked with interest include AIG, from the United States,the French insurer AXA, and Generali of Italy in the insurance industry, although the leading player Aviva has ruled itself out.

Bank of China and Ping An, China's biggest insurer, could also be in the running. China's insurance market is set to open up in the next two years, and RBS's systems could give one of those companies a big advantage in their home market.

The private equity giant TPG was the latest to be linked to the asset, but it is understood that the firm is just one of numerous buyout groups looking at a bid.

One source at a multinational private equity rival said: "Everybody in the private equity industry is looking at this business. This is a massively early stage, though. It is a good-quality operation and private equity will always be interested in something like this."

It is likely that firms including Kohlberg Kravis Roberts, Blackstone and Apax have all taken a look at the Royal Bank's insurance arm.