The board of directors of Barclays has entered into an agreement for the sale of its iShares business to Blue Sparkle, a new limited partnership established by CVC Capital Partners, for a total consideration of approximately $4.4 billion.
Barclays has said that this transaction gives the company the opportunity to maximise value through the sale of a business which represents a channel for Barclays Global Investors (BGI); and provides 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.
The transaction also enhances the capital position of Barclays, adding an estimated 54 basis points to equity tier one pro forma as at December 31, 2008.
Under the transaction agreement, for a period of at least 45 business days from April 15, 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.
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 $3.1 billion. Barclays has agreed to hold no less than 51% of the total financing for the first five years and may syndicate the remaining 49% after the first year. The remainder of the consideration will be funded by equity provided by Blue Sparkle.
John Varley, group CEO of Barclays, 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.
