Barclays in talks to sell iShares asset management unit for $4.3.billion
31 Mar 2009
Barclays Plc, the UK's third-largest bank, is in exclusive talks to sell its iShares unit to CVC Capital Partners Ltd. for about £3 billion ($4.3 billion), Dow Jones Newswires reported today. The price is equvalent to 10 times the business' earnings before interest, taxes, depreciation and amortization (EBITDA).
Barclays will retain a 20-per cent stake in the exchange-traded funds unit and will keep iShares's securities lending division. Barclays declined to comment. It said on Monday talks about the sale of the exchange-traded funds unit were "progressing well", alongside news it had rejected an offer to take part in a British government plan to insure risky assets.
An agreement to sell iShares may help Barclays avoid tapping government funds after the bank opted out of the Treasury-backed asset insurance program. Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc slipped into government control after taking taxpayer funds. The UK Financial Services Authority said last week London-based Barclays has sufficient capital to weather the financial crisis. (See: British government becomes majority shareholder in RBS as investors reject stock offering / UK government ups stake in Lloyds bank to 77 per cent)
The deal, expected to be completed by the end of the week, would be a coup for the London-based buyout firm, which entered the auction relatively late in the process. Other bidders for iShares included a group comprising Hellman & Friedman and Apax Partners and another consortium made up of Colony Capital and Bain Capital. Goldman Sachs is also likely to have put in a bid.
IShares, which had £226 billion under management at the end of last year, is the largest manager of funds that can be bought and sold like stocks. 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 of funds under management at the end of 2008.
CVC started a team to invest in financial services companies in September, putting managing partner Jonathan Feuer in charge of the unit. The firm held talks last year to buy a controlling stake in RBS's UK insurance assets, among them Churchill and Direct Line. RBS later abandoned the sale. CVC is investing about 16 billion euros ($21 billion) in leveraged buyout funds.
Barclays has said it will use the money raised by iShares sale to bolster its financial strength. The bank's Tier 1 capital ratio, a measure of financial strength, is 6.7 per cent, lagging behind government-owned RBS and Lloyds. Lloyds estimates the government's asset-protection program will increase its core capital ratio to 14.5 percent, while RBS says its ratio will rise to 12.4 per cent.
