hierarchy casablanca: Direct Line IPO may be marred by industry probe

Saturday, September 29, 2012

* OFT to decide on anti-trust probe Friday - spokesman

* Direct Line expected to open order book Friday

LONDON, Sept 27 (Reuters) - Britain's consumer watchdog

could on Friday call on competition regulators to probe the

motor insurance market just as its biggest player, Direct Line,

enters a critical phase in its planned stock market listing,

London's biggest in over a year.

The Office of Fair Trading (OFT), which in May provisionally

recommended the industry be investigated on the grounds that

"dysfunctional" competition forces up the cost of car insurance,

will make a final decision on Friday, a spokesman said.

The watchdog's provisional recommendations for an

investigation by the Competition Commission are usually followed

by a formal referral.

"In most cases where there has been a provisional decision,

this has resulted in a reference," the OFT spokesman said.

The OFT's decision is expected to come as Direct Line begins

accepting investor orders for its shares in an initial public

offering that is likely to value the company at about 2.5

billion pounds ($4.1 billion).

Direct Line announced its intention to float on Sept. 14,

and would under a typical timetable be expected to open its

order book within two weeks.

Direct Line's owner, Royal Bank of Scotland, is

selling the business at European regulators' request to offset

government support it received in the 2008 crisis which left it

82 percent state-owned.

Direct Line and RBS declined to comment.

Analysts have said a competition probe could make it more

difficult for motor insurers to boost their profits through fees

from ancillary services such as the provision of replacement

vehicles.

Direct Line, which also trades under the Churchill and

Privilege brands, is Britain's biggest motor insurer, covering

about one in three cars on the country's roads.

hierarchy casablanca