UK/US- Barclays announced today the sale of its iShares ETF business for US$4.4bn to private equity firm CVC Capital Partners.
The bank will provide $3.1bn in debt to help finance the deal, according to a Barclays statement. Officials at Barclays expect the deal to close in the third quarter of 2009 after regulatory approval is received in the US, UK, Germany and Ireland.
Barclays group chief executive John Varley said: "This transaction realises 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. Barclays shareholders will benefit from a reinforcement of our capital base and an ongoing commercial relationship with iShares."
The British bank was looking to raise cash and avoid joining the UK's asset protection scheme which would require an injection of funds from the government. The bank announced on March 31 it would continue to operate without government intervention.
Barclays will continue to benefit after the sale. The firm will maintain a participation interest that entitles Barclays to receive 20% of CVC's gains on the business, in cash, if certain return thresholds are met.
Senior officials at Barclays are also set to benefit through a compensation scheme set up through the sale. Robert Diamond, president of Barclays and chief executive of Barclays Global Investors, the bank's asset management arm, will pocket $6.9m after the sale. Some BGI employees will also receive shares and options of up to 10.3% of the unit's equity.
The sale provisions also allow Barclays to shop around for a better offer for its iShares business from a third party for at least 45 days, though if it decides not to sell to CVC, BGI will pay a fee of $175m.
CVC has already fought off other private equity bidders including Apax Partners, Hellman and Friedman and Bain Capital. (Global Pensions, 31 March 2009)
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