The board of directors of Barclays have announced an agreement for the sale of its iShares business to Blue Sparkle, a new limited partnership established by CVC Capital Partners Group
The board of directors of Barclays have announced an agreement for the sale of its iShares business to Blue Sparkle, a new limited partnership established by CVC Capital Partners Group SICAV-FIS, for a total consideration of approximately USD4.4bn (GBP3.0bn).
Barclays says the transaction will allow it to crystallise value through the realisation of an expected net gain on sale of USD2.2bn (GBP1.5bn), taking into consideration goodwill of USD1.4bn (GBP1.0bn), from a business grown largely organically over the last five years.
It says it will also provide Barclays the opportunity to participate in future value creation through a continuing commercial relationship with the iShares business and the potential crystallisation 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.
In addition, it will enhance the capital position of Barclays, adding an estimated 54bps to Equity Tier 1 pro forma as at 31 December 2008. Taking into account the expected net gain on the sale of iShares, conversion of the Mandatorily Convertible Notes issued in November 2008 and all Tier 1 capital, on a pro forma basis, Barclays would have reported an estimated Tier 1 ratio of 10.3 per cent and an estimated Equity Tier 1 ratio of 7.2 per cent as at 31 December 2008.
Under the transaction agreement, for a period of at least 45 business days from 15 April 2009, Barclays may solicit proposals for iShares and potentially other related businesses from third parties. There can be no assurance that the solicitation of proposals will result in any superior alternative transaction being agreed.
iShares is a global provider of exchange traded funds and forms part of BGI. Following the transaction, BGI will remain one of the world’s largest asset managers. BGI will retain all of its securities lending business.
The consideration of USD4.4bn (GBP3.0bn), which includes the Barclays cash-settled participation interest, represents a multiple of 10.1x 2008 EBITDA of iShares.
The net proceeds of the transaction, after costs and assuming the distribution of a dividend to the minority shareholders in BGI comprising current and former employees, will be retained by Barclays and contributed to capital resources. The transaction is subject to receipt of regulatory and other approvals.
The debt financing for the transaction will be provided by Barclays in the amount of approximately USD3.1bn (GBP2.1bn). Barclays has agreed to hold no less than 51 per cent of the total financing for the first five years and may syndicate the remaining 49 per cent after the first year. The remainder of the consideration will be funded by equity provided by Blue Sparkle (‘Bidco’).
John Varley, group chief executive of Barclays, says: ‘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.’
