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‘Surprising to some’: RBS shareholders encouraged to accept late offer to avoid litigation risks

The board of the 9,000-strong Royal Bank of Scotland (RBS) Shareholders Action Group has endorsed a settlement to claimants of 82p per £1 offer made by RBS on the evening of the trial, although the sum is below original estimates.

In a letter to theshareholders published on 27 May, the group said: ‘We have decided to accept the offer of 82p per share on behalf of our membership, [a decision] fully supported by our legal advisers. Taking into account all of the relevant factors, we have come to the conclusion that it is in the best interests of all claimants for us to accept the 82p per share offer.’

Acknowledging that the decision may be ‘surprising to some’ claimants, as the offer was ‘slightly below the previously advised ranges of damages, being 92p per share and 234p per share’, the group said accepting the offer would avoid the practical and legal risks involved in a full trial.

The statement adds that ‘a substantial claimant in the action’ is funding the case and has chosen to accept the offer, leaving no available funding to take the matter to trial. All corporate claimants have indicated their acceptance of the offer. Settlement would also lessen legal costs, which would be deducted from the total damages the claimants receive.

 ‘This is a significant sum and is effectively double the amount that was paid to the other settling claimant groups,’ the statement noted.

The next step is for at least 70% of the remaining claimants, some 9,000 retail investors, to agree to the settlement individually before 1 June. The case will then return to the High Court on Thursday, where Mr Justice Hildyard will hear any representations from the parties.

The trial was due to open on 22 May, but was adjourned until 7 June for settlement negotiations following the last-minute offer. The claim was launched in 2012 by around 27,000 retail investors who claimed they were misled about the bank’s financial health before it sought £12bn from investors in 2008 for a rights issue.

Over 9,000 claimants remain in the action after the majority of claimants settled with RBS for 41p per share in December 2016. In April 2017, 40% of the Signature Litigation Group also settled with RBS for 43.2p per share.

The original claimants included RBS staff and pensioners, institutional investors such as Wells Fargo, Boeing pension fund, Bank of America Merrill Lynch and Bank of Ireland.

Some UK local authority pension funds, including Bedfordshire County Council, Essex, Nottinghamshire and the London Borough of Merton, also joined the litigation.

The remaining claimants have been represented by Signature Litigation partner Graham Huntley. RBS is represented by Herbert Smith Freehills, led by partners Simon Clarke, Adam Johnson and Kirsten Massey. Former RBS CEO Fred Goodwin, who was listed as a witness, is represented by Clifford Chance (CC) litigation partner Dorian Drew. K&L Gates is representing London and Northern Capital Partners (LNCP). Hausfeld is representing Hunnewell Partners.