NAB to sell Clydesdale and Yorkshire Bank; IPO proceeding tomorrow with value around £1.5bn

The National Australia Bank, current owner of Britain’s Clydesdale and Yorkshire Bank, has received approval from Australian courts to sell the British entity, just hours before Clydesdale and Yorkshire Bank is due to begin conditional trading on stock exchanges in Britain and Australia.

National Australia Bank (NAB) has officially confirmed that its demerger has been approved, which means that Clydesdale and Yorkshire Bank’s IPO can now proceed.

Originally, the IPO was due to take place today, however a low pricing of 180p per share in this morning’s valuation has resulted in the IPO having been deferred until tomorrow.

NAB, which is a prominent interbank FX provider in Australia, as well as offering retail and commercial customers FX forward conracts and vanilla FX options, is offloading the British bank to the satisfaction of CEO Andrew Thorburn.

Mr. Thorburn said in a commercial statement

“The court’s approval today is the final significant step in the separation of NAB and CYBG into two independent corporate groups. The demerger allows each business to focus on improving performance in their home markets and on business priorities that will maximise value for their respective shareholders. Both companies can now look ahead to the future.”

Today, Clydesdale and Yorkshire Bank was expected to begin conditional trading, however this is likely to take place tomorrow due to this morning’s bottom range pricing. Unconditional trading is likely to commence on February 8.

Yesterday, the bank had set an indicative pricing range of 175p to 235p for the IPO, which equates to a valuation of between £1.5 billion and £2 billion for the entire business.

The demerger between NAB and Clydesdale and Yorkshire Bank will involve selling 75% of the bank’s shares to NAB shareholders and 25% to institutional investors via the proposed IPO.

Today’s institutional nature of former regional banks which began as independent savings organizations with passbooks in provincial areas of the UK which were intended to assist working people to save to buy (or build) houses via savings and mortgage lending is far removed from the origins of both Clydesdale and Yorkshire Bank.

Clydesdale Bank was purchased by NAB in 1987 at which time it was merged with NAB’s other British Subsidiary Yorkshire Bank. To this day, Clydesdale Bank retains its mandate to produce official bank notes in Scotland.

In a statement today, Clydesdale and Yorkshire Bank said:

“This is a near term downgrade of the short- and/or long-term deposit rating or the placing of such rating on credit watch with negative implications. Clydesdale and Yorkshire Bank does not anticipate any such downgrade to have any material impact on its ability to raise funding, the overall cost of funding, or the financial outlook for CYBG. A downgrade of the short- and/or long-term deposit rating would require Clydesdale Bank to take mitigating actions in relation to its existing secured funding programmes.”

“This ratings development may not occur, and should it occur, is not considered material to the financial position and outlook of CYBG. However, given the proximity of this request to the IPO, NAB and CYBG have decided to delay finalisation of the IPO for 24 hours.”

Placing it near the lower £1.5 billion valuation at this point, it will be of great interest to view the pricing tomorrow at the time of the execution of the IPO.