Corsair charging ahead in race for RBS branches A consortium led by private equity group Corsair - and backed by the Church of England - has moved into pole position to take on more than 300 branches being sold by Royal Bank of Scotland. A final decision has yet to be made, and two rival bids from a consortium led by the Blackstone and AnaCap buyout groups, and W&G Investments - a group of investors fronted by former Tesco finance director Andy Higginson - have not been formally ruled out. But sources last night said RBS's board was expected to decide to give Corsair, and its US private equity partner Centerbridge, exclusive rights to negotiate a deal, with an announcement likely next week. Standard Life is another backer of Corsair. The move comes as RBS disclosed yesterday that it had raised £630 million from the sale on Thursday night of a 20 per cent holding in the Direct Line insurance group to reduce its stake to 28.5 per cent. Like the sale of the 315 bank branches, RBS was ordered by the European Commission (EC) to divest the insurer in return for its £45 billion state bailout in the 2008 financial crash. On the branches sale, dubbed Project Rainbow, it is understood that the bank's directors have decided that both private equity bids offer better value to RBS's owners - in particular the taxpayer with an 81 per cent stake - than the full takeover bid on the table from W&G Investments. "The Higginson offer was way below Corsair and Blackstone on value," a source said. Unlike with the W&G offer, RBS would retain a stake in the branches business if sold to the private equity buyers for up to two years to share in any upside from a proposed flotation of the assets at that time. The branches business being sold has about 250,000 small business customers, some 1,200 medium-sized business customers and 1.8 million individual customers. The group had planned to sell the assets, which are focused mainly on small business lending, to Santander UK but that £1.65bn deal fell through after more than a year of negotiations largely through IT issues. It is thought Corsair, where former Labour government trade minister and ex-Standard Chartered bank boss Lord Davies is vice-chairman, is partly preferred by RBS as a buyer because of perceived superior internal controls for any new entity. RBS executives are also said the have considered that W&G's offer of between £1.1bn and £1.5bn undervalued the business. Corsair's proposal would see it invest between £600m and £800m to become a "cornerstone" investor ahead of a flotation. The original deadline from Brussels for RBS to sell the branch business was the end of 2013, but the Treasury is negotiating a deadline extension with the EC. Direct Line Group was floated on the stock market last year. On the latest selldown of its stake in the insurer, RBS finance director Bruce Van Saun said: "This successful sale keeps RBS fully on tract to meet its obligation to divest its stake in Direct Line by end-2014." Direct Line is one of the UK's largest home and general insurers. A banking source said yesterday that the stake sale was "comfortably covered" and priced at the top end of a 208p to 210p price range. RBS's shares closed last night down 4.6p at 364.4p.