The W&G name has not been seen on the high street since 1986.
A consortium backed by the Church of England will be among the new owners of 314 branches being sold by bailed-out Royal Bank of Scotland.
The Church Commissioners, which manages £5.5bn of investments to support the church, has backed the bid put together by private equityfirms Corsair Capital – where Lord Davies, the former boss of Standard Chartered is vice-chairman - and Centrebridge, and the fund manager Rothschild.
RBS has been forced to sell the branches by the EU as a result of its 2008/9 bailout by the government and is reviving a defunct brand – Williams & Glyn's – to allow the branches to be separated off from its existing network.
However, the W&G name – last seen in 1986 – is unlikely to appear on high streets until the end of next year.
RBS, 81% of which is owned by the taxpayer, is helping the Corsair consortium fund the deal by lending it £270m of the £600m being invested by the private equity-led group. Technically RBS is issuing a bond to the consortium which will convert into shares in W&G when it is floated – probably not before the end of 2015.
The exact price that RBS can receive for the sale of the branches will not be known until the stock market flotation. The consortium could end up owning between 30% and 49% after the share sale. The bailed-out bank had originally hoped to receive £1.6bn for the branches from the UK arm of the Spanish bank Santander before the deal fell apart last October.
After that sale collapsed, the bidding process was reopened and whittled down to three main offers – the one selected as well as one fronted by former Tesco finance director Andrew Higginson and the other led by former HSBC banker Alan Hughes, backed by private equity firms AnaCap and Blackstone.
Under the terms imposed by Brussels, the divestment of the RBS branches was supposed to take place before the end of 2013 but the Treasury will now be asking the EU for more time. But the agreement with Corsair completes the shrinkage of RBS that was undertaken by the latter's chief executive, Stephen Hester, who leaves on Monday, the same day that finance director Bruce van Saun takes up the role of running the US arm Citizens.
"This deal concludes what has been a very competitive process, with several highly credible bidders. We believe this transaction demonstrates that Williams & Glyn's is a viable and attractive business which will be positioned as a strong, customer-focused challenger bank," Van Saun said.
The EU also required other businesses to be sold off– commodities business Sempra, money transmission operation World Pay, insurer Direct Line – and for RBS to reduce its balance sheet from £2.3 trillion to £1tn.
The government has embraced the imposition of the break up the RBS branch network as a way to inject fresh competition on the high street, along side the 631 TSB branches that Lloyds has been forced to spin off as result of its bailout.
The two "new" networks are made up of different types of customers. The RBS network – code named Rainbow – is based on small business customers to tackle its dominance in this area while the TSB branches – code named Verde – are focused on retail customers, where Lloyds is the dominant player.
Both the TSB and W&G branches will be focused on becoming local community banks to counter the impression that major banks are dislocated from their customers. The spun-out brands will be hoping to benefit from the seven day switching service launched this month to make it easier to move current accounts although data released on Thursday showed a disappointing take up – 35,000 customers had used the service in 10 days and if that rate is maintained, it will put the switching service on track to only just beat the 1.2m accounts moved last year.
The Corsair consortium is chaired by former United Utilities boss Philip Green while the bank will be run by former Lloyds banker John Maltby. Davies will be a non-executive director.