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Barclays sells iShares to CVC for $4.4 billion

Barclays sells iShares to CVC for $4.4 billion

Barclays PLC said Thursday that it has agreed to sell its U.S.-based asset management business iShares to European private equity firm CVC Capital Partners Group for $4.4 billion.
Barclays will receive a net gain of $2.2 billion from the sale, and retain an interest in San Francisco-based iShares via a "cash-settled participation interest" that will give the bank a return if certain performance-related hurdles are met.
Barclays chief executive John Varley said that the deal presents "significant value" for Barclays.
"iShares has experienced rapid growth over the past several years and has reached a point where it can develop further on a standalone basis," Varley said in a statement. "Barclays shareholders will benefit from a reinforcement of our capital base and an ongoing commercial relationship with iShares."
The purchase price includes $1.7 billion of senior debt, while Barclays will provide debt financing of around $3.1 billion for the transaction.
The sale will boost Barclays' capital after it turned down a place in the British government's program to insure so-called toxic assets, choosing to avoid state influence in its business. The Treasury increased its stake in both the Royal Bank of Scotland Group PLC and Lloyds Banking Group PLC after they received government guarantees.
Barclays said the sale will boost its equity tier one ratio _ a key measure of its capital strength _ to 7.2 percent at Dec. 31, 2008. Lloyds has estimated it participation in the government's asset protection program will increase its core capital ratio to 14.5 percent, while RBS has put its ratio at 12.4 percent.
Barclays shares were up 10.3 percent at 174 pence on the London Stock Exchange after the deal was announced, after earlier surging as much as 16 percent.
iShares, the world's biggest manager of exchange-traded funds, is part of San-Fransisco-based Barclays Global Investment. It accounts for more than half of that unit's profits despite managing less than a quarter of the operation's assets.
The division had 226 billion pounds of assets under management at the end of last year _ an exchange-traded fund is a type of investment vehicle which can be traded on exchanges in the same way as shares, and gives inexpensive and broad access to other kinds of investments.
Barclays said its expected net gain of $2.2 billion includes goodwill of $1.4 billion "from a business grown largely organically over the last five years."
It added that it will retain the opportunity to "participate in future value creation" through a continuing commercial relationship with the iShares business.
That includes the "potential crystallization of consideration through a cash-settled participation interest entitling Barclays to receive a portion of the value uplift on iShares if certain performance-related hurdles are met."
Under the transaction agreement, Barclays can solicit other bids for iShares and related businesses for at least 45 business days from April 15. But it stressed there was "no assurance that the solicitation of proposals will result in any superior alternative transaction being agreed."


Updated : 2021-10-21 22:19 GMT+08:00