Barclays agrees to sell IShares to CVC
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Bloomberg
Oluşturulma Tarihi: Nisan 11, 2009 00:00
LONDON - Barclays sells its asset management business iShares to CVC Capital Partners for $4.4 billion. A CVC team lead by the firm’s managing partner Jonathan Feuer has been seeking out financial services companies to invest in since September
Barclay, the U.K.’s third-largest bank, agreed to sell its iShares unit to CVC Capital Partners Ltd. for $4.4 billion to bolster capital.
London-based Barclays will finance $3.1 billion of the purchase price and retain a 20 percent stake in iShares, the biggest manager of exchange-traded funds, the company said in a statement Thursday.
The deal will increase Barclays’ Tier 1 capital ratio, a measure of financial strength, to 7.2 percent after the bank shunned the U.K.’s asset-insurance program to avoid state influence. The Treasury increased its stake in Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc after they received government guarantees. Barclays’s loans passed a stress test by the Financial Services Authority, it said last month.
"The bank will need to do more to increase its capital, with a mixture of further asset sales, buying back its debt, and raising equity," said Christopher White, who helps manage 50 billon pounds at Threadneedle Asset Management in London.
After the deal, Barclays’ capital ratios will still trail those of its U.K. rivals. Lloyds estimates the asset-protection program will increase its core capital ratio to 14.5 percent, while RBS says its ratio will rise to 12.4 percent.
IShares had 226 billion pounds under management on Dec. 31. Exchange-traded funds typically track the performance of indexes such as the Standard & Poor’s 500. The unit is part of San Francisco-based Barclays Global Investors, which had 1.04 trillion pounds of funds under management at the end of 2008.
"They may regret its sale in time as iShares is a fairly stable business and the money may go into businesses that are not so stable or safe," said Dave Bradbury, who helps manage $6 billion at Canada Life Ltd. in London and doesn’t own the stock.
Barclays President Robert Diamond may receive a cash dividend of as much as $6.9 million as a result of the sale because he holds shares and options in BGI, Barclays said in the statement.
Under terms of the agreement, Barclays may solicit additional offers for iShares and related businesses for 45 business days from April 15. The bank must pay CVC a $175 million break fee if it terminates the deal. BGI will retain iShares’ securities lending unit, the bank said.
CVC financial team
CVC, a London-based private equity firm, started a team to invest in financial services companies in September, putting managing partner Jonathan Feuer in charge of the unit. CVC held talks last year to buy a controlling stake in RBS’s U.K. insurance assets before RBS abandoned the sale. CVC is investing about 16 billion euros ($21 billion) in leveraged buyout funds.
Other firms that had expressed interest in iShares included Colony Capital LLC and Bain Capital LLC, two U.S. private equity firms; New York-based Goldman Sachs Group Inc.; and a group of LBO firms that included Hellman & Friedman LLC of San Francisco and London-based Apax Partners Worldwide LLP, according to people familiar with the discussions.
Barclays Capital and Lazard & Co. acted as financial advisers to Barclays, while Clifford Chance LLP and Sullivan & Cromwell LLP provided legal advice. Deutsche Bank AG said it provided advice to CVC. A spokeswoman for CVC declined to comment on the other parties involved.
Varley independence drive
The iShares sale is Barclays Chief Executive Officer John Varley’s latest move to raise capital without taking government aid. Last year, he turned to a group of Middle Eastern investors for more than 5 billion pounds rather than accept state funds.
By contrast, the government’s stakes in RBS and Lloyds may reach 75 percent after two taxpayer-funded bailouts, including the asset insurance program.
Barclays is the best-performing U.K. bank stock this year, rising 15.7 percent, compared with a 13.9 percent drop in the FTSE 350 Banks Index. Still, Barclays has more investors betting against it than any other U.K. bank stock. About 4.8 percent of Barclays stock was on loan as of April 7, indicating so-called short sellers expect its shares to fall, according to figures from Data Explorers. That compares with 3.4 percent for HSBC Holdings Plc and 1.8 percent for Lloyds. Analysts at Societe Generale estimated on March 30 that the bank may need 20 billion pounds of capital and eventually have to sell a 67 percent stake to the government.
"The market’s major concern about Barclays is that it faces writedowns that are higher than expected," said London- based Richard Hunter, head of U.K. equities at Hargreaves Lansdown Stockbrokers. "It has already been to shareholders and there is the potential for rights issue fatigue in the market."
London-based Barclays will finance $3.1 billion of the purchase price and retain a 20 percent stake in iShares, the biggest manager of exchange-traded funds, the company said in a statement Thursday.
The deal will increase Barclays’ Tier 1 capital ratio, a measure of financial strength, to 7.2 percent after the bank shunned the U.K.’s asset-insurance program to avoid state influence. The Treasury increased its stake in Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc after they received government guarantees. Barclays’s loans passed a stress test by the Financial Services Authority, it said last month.
"The bank will need to do more to increase its capital, with a mixture of further asset sales, buying back its debt, and raising equity," said Christopher White, who helps manage 50 billon pounds at Threadneedle Asset Management in London.
After the deal, Barclays’ capital ratios will still trail those of its U.K. rivals. Lloyds estimates the asset-protection program will increase its core capital ratio to 14.5 percent, while RBS says its ratio will rise to 12.4 percent.
IShares had 226 billion pounds under management on Dec. 31. Exchange-traded funds typically track the performance of indexes such as the Standard & Poor’s 500. The unit is part of San Francisco-based Barclays Global Investors, which had 1.04 trillion pounds of funds under management at the end of 2008.
"They may regret its sale in time as iShares is a fairly stable business and the money may go into businesses that are not so stable or safe," said Dave Bradbury, who helps manage $6 billion at Canada Life Ltd. in London and doesn’t own the stock.
Barclays President Robert Diamond may receive a cash dividend of as much as $6.9 million as a result of the sale because he holds shares and options in BGI, Barclays said in the statement.
Under terms of the agreement, Barclays may solicit additional offers for iShares and related businesses for 45 business days from April 15. The bank must pay CVC a $175 million break fee if it terminates the deal. BGI will retain iShares’ securities lending unit, the bank said.
CVC financial team
CVC, a London-based private equity firm, started a team to invest in financial services companies in September, putting managing partner Jonathan Feuer in charge of the unit. CVC held talks last year to buy a controlling stake in RBS’s U.K. insurance assets before RBS abandoned the sale. CVC is investing about 16 billion euros ($21 billion) in leveraged buyout funds.
Other firms that had expressed interest in iShares included Colony Capital LLC and Bain Capital LLC, two U.S. private equity firms; New York-based Goldman Sachs Group Inc.; and a group of LBO firms that included Hellman & Friedman LLC of San Francisco and London-based Apax Partners Worldwide LLP, according to people familiar with the discussions.
Barclays Capital and Lazard & Co. acted as financial advisers to Barclays, while Clifford Chance LLP and Sullivan & Cromwell LLP provided legal advice. Deutsche Bank AG said it provided advice to CVC. A spokeswoman for CVC declined to comment on the other parties involved.
Varley independence drive
The iShares sale is Barclays Chief Executive Officer John Varley’s latest move to raise capital without taking government aid. Last year, he turned to a group of Middle Eastern investors for more than 5 billion pounds rather than accept state funds.
By contrast, the government’s stakes in RBS and Lloyds may reach 75 percent after two taxpayer-funded bailouts, including the asset insurance program.
Barclays is the best-performing U.K. bank stock this year, rising 15.7 percent, compared with a 13.9 percent drop in the FTSE 350 Banks Index. Still, Barclays has more investors betting against it than any other U.K. bank stock. About 4.8 percent of Barclays stock was on loan as of April 7, indicating so-called short sellers expect its shares to fall, according to figures from Data Explorers. That compares with 3.4 percent for HSBC Holdings Plc and 1.8 percent for Lloyds. Analysts at Societe Generale estimated on March 30 that the bank may need 20 billion pounds of capital and eventually have to sell a 67 percent stake to the government.
"The market’s major concern about Barclays is that it faces writedowns that are higher than expected," said London- based Richard Hunter, head of U.K. equities at Hargreaves Lansdown Stockbrokers. "It has already been to shareholders and there is the potential for rights issue fatigue in the market."