RBS-Backed Fund Targets £200m Software Sale

A fund in which the taxpayer-backed Royal Bank of Scotland (RBS) is an investor is preparing to offload a £200m software firm as it reshapes its portfolio.

Sky News understands that Pollen Street Capital, a private equity firm, has hired bankers to sell Target Group, which provides outsourced processing and software solutions to the loans, savings and insurance markets.

Quayle Munro, an advisory firm, has been asked to oversee the sale.

The auction will continue the restructuring of Pollen Street's portfolio since it was spun out from the direct ownership of RBS.

The taxpayer-backed lender remains an investor in Pollen Street's fund but has no role in its management or strategy.

Among the other businesses in which Pollen Street is an investor is Shawbrook, the challenger bank which has been among those unhappy about moves by George Osborne, the Chancellor, to increase taxes on some smaller banks.

Shawbrook announced last week that it had recruited Steve Pateman, a highly regarded Santander UK executive, to be its new chief executive.

The spin-off of the RBS Special Opportunities Fund, which was renamed Pollen Street Capital, reflected a trend among global banks to downsize their principal investment businesses because of more punitive capital treatment by international regulators.

In RBS's case, the outsourcing of the vehicle was also a consequence of growing pressure from Mr Osborne to focus on consumer and small business lending.

RBS held a 13.5% direct stake in the SOF, which describes itself as "a discreet £1.1bn third-party fund" but which has provoked occasional controversy since the bank’s rescue in 2008 by continuing to make new investments.

The fund had been part of RBS's non-core division since 2008, and continues to own Cashflows, a payments business, and Erno Laszlo, a premium skincare brand.

Under the management of Lindsey McMurray, Pollen Street has exited a number of other investments including through a stock market listing of Arrow Global, the debt collection agency which snapped up a £900m portfolio of student loans from the Government.

Among the other businesses it has been an investor in are Catalina, a Bermuda-based acquisition vehicle that is currently engaged in bidding for the insurance assets of the struggling Co-operative Group.

RBS SOF sold its stake in Catalina to Apollo Management, another investment firm, earlier this year.

It was also a shareholder in Four Seasons, the nursing home group.

Pollen Street could not be reached for comment on Thursday.