Direct Line to get Berkshire Hathaway Bid
Warren Buffett, the American billionaire and chairman and chief executive of conglomerate holding company Berkshire Hathaway, has expressed an interest in making a bid for Direct Line, which is part of Royal Bank of Scotland’s insurance arm. The intention to make an offer was revealed after the bank sought assistance from its advisors for selling the business after suffering heavy losses in the insurance arm due to car accident claims.
Royal Bank of Scotland has been ordered by the European Commission to sell Direct Line by the end of 2012 because the bank used public money during the financial crisis last year to prevent ceasing to exist. Buffett isn’t the only one who has expressed intentions to offer a bid, as Allstate, the US insurer, seems to be interested in the business as well.
Royal Bank of Scotland hasn’t confirmed potential bidders, but did say that they are thinking about selling Direct Line. Chief executive Stephen Hester said earlier in the year that they would have floated the company, but the sale talks emerged after its performance declined. A spokesman for the bank said that they won’t do a rapid IPO or sale due to the disposal deadline, adding that they have until the end of December 2013 to offload their insurance operations, so speculations are premature.
A £54 billion rescue funded by taxpayers was granted to Royal Bank of Scotland by the British government to help the business survive the financial crisis, despite European Union competition regulations. The insurance arm of the bank, which the government owns 83% of, includes the Churchill and Green Flag brands.