Lloyds Mulls Options For Private Equity Business

Lloyds Banking Group is still in the early stages of considering options for its private equity unit, sources familiar with the process said, even as interest builds with at least five buyout firms circling.

Britain’s largest retail bank has been mulling over the future of the Bank of Scotland Integrated Finance unit since soon after it completed the takeover of the unit’s former parent HBOS in January last year, with investment bank UBS charged during the summer with advising on the process.

Bridgepoint Capital, which was spun out of National Westminster Bank a decade ago, is considering a bid with Lexington Capital, one person familiar with the deal said. Lexington would provide funding for a deal while Bridgepoint would manage the assets, the person said.

Other potential buyers for all or some of the assets include private equity groups 3i Goup, Coller Capital and Advent International, other sources close to the process said.

“We believe a deal will get done this time. Lloyds are determined to strike a deal as they want to get their house in order,” said one potential bidder, who declined to be named.

An attempt by HBOS to sell the business in 2008, when it also drew interest from Harbourvest and Paul Capital, was abandoned due to deteriorating market conditions. Options currently being considered for the unit — formerly part of HBOS’s corporate division, headed by the now disgraced Peter Cummings — include a full sale, a partial sale, a joint venture in which Lloyds would retain a minority stake and simply keeping the business, the sources said.

A management buyout has not been considered, one of the sources added.

The joint venture option is gaining traction, but Lloyds is in no hurry to offload the stakes, which include well-known names like David Lloyd gyms and housebuilder Keepmoat, and is still studying all options. It has done no marketing for the process, one of the sources said.

The sources added Lloyds had not excluded the idea of selling stakes individually, if approached by interested buyers.

Another of the sources, also close to the sale process, said Lloyds could consider holding on to some of the debt, even in the event of a sale of all or most of the equity. Integrated Finance holds stakes in a string of well-known retailers and high street names, including Vue cinemas, Sunseeker yachts, and shirtmaker T.M. Lewin. It does not contain Lloyds’ larger property and housebuilder stakes.

Lloyds declined to comment.

(By Reuters Correspondents Victoria Howley and Clara Ferreira-Marques)