RBS wants joint venture with Pru on Egg

Prudential has made a last-ditch attempt to offload its majority stake in Egg by resurrecting talks with Royal Bank of Scotland over setting up a possible joint venture investment in the internet bank.

Prudential is thought to have approached RBS a few weeks ago. The move signals increasing desperation on the part of the insurer, as it had already called off talks with RBS earlier this year because the two sides could not agree on a price for Egg.

This time, RBS is understood to have told Prudential it was not interested in buying its entire 79 per cent stake in Egg, but said it would discuss a possible 50-50 joint venture investment in the business.

Under the plan, RBS's systems could be used to produce and process products which would be sold under Egg's distinctive brand. The Scottish bank has already made a success of a similar 50-50 joint venture with the supermarket giant Tesco, setting up Tesco Personal Finance in 1997.

However, there is a likelihood that Prudential will not even be able to tempt RBS to agree to take a stake in Egg. The two sides are not expected to have reached an agreement by today, when Egg unveils its half-year results. City sources said there was a significant possibility that Prudential will have to abandon the sale of Egg altogether, as it has held talks with a string of interested parties in the past seven months without managing to conclude a deal.

Neither RBS or Prudential would comment on the talks, which re-started before Prudential announced last week that it was finally pulling the plug on Egg's disastrous foray into France.

Closing down Egg's French operations will cost about £113m and will involve extensive negotiations with the country's labour unions because 450 jobs will be lost. The closure was interpreted as an attempt by Prudential to make Egg more attractive to interested bidders.

The auction of Egg, which began in January, has become one of the most drawn-out attempts by a UK financial services company to sell part of its business. It emerged this week that JP Morgan, the investment bank, has held informal talks with Prudential, though they are at a very early stage.