Blackstone in Talks to Acquire Stake in Goldman Sachs's UK Unit, Rothesay Life

Private equity giant Blackstone is in talks to buy a minority stake in Goldman Sachs's UK pension insurance operation Rothesay Life.

The Financial Times cites sources familiar with the matter as saying that the talks on the deal are being led by Blackstone's $3bn (£1.91bn, €2.24bn) worth "tactical opportunities" fund.

Earlier, it was reported that Goldman Sachs planned to sell a majority stake in its London-based insurance unit Rothesay Life over the next year, to comply with the Basel 3 norms imposed on banks after the financial crisis.

Bankers estimated the Rothesay unit's value at between £750m and £950m, but the sale process does not involve a formal auction, the FT adds. However the details of the deal are yet to be disclosed.

Formed in 2007 by Goldman, Rothesay struck deals with pension schemes at various companies. It expanded its business in 2011 with the acquisition of Paternoster and enlarged its asset base to more than £3bn. Rothesay is assumed to have pensions liabilities of almost £10bn.

The Basel 3 reforms in the aftermath of the financial crisis have made annuity businesses less attractive for banks. Under the Basel 3 rules, banks are required to set aside more capital so as to strike a balance with potential losses. The tough regulations have forced banks to sell many of their operations to a more lightly-regulated player like Blackstone.

Earlier this year, Goldman sold 80% of its other insurance business, Global Atlantic Financial, owing to the new capital norms.

The sale was beneficial for Goldman as it increased its tier 1 common capital ratio under Basel 3 norms by half a percentage point, Goldman Chief Financial Officer Harvey Schwartz said.

MassMutual, a US-based mutual life insurer, earlier this year infused £100m worth of debt into Rothesay. This was done to replace a loan that Goldman earlier had with the subsidiary.