Barclays – China and Singapore negotiations

Reports have arisen that Barclays are in talks with China and Singapore governments to raise around £10 billion to finance its takeover of the Dutch bank, ABN Amro.

The money raised could allow Barclays to increase its takeover bid for ABN to around £50 billion, should the talks prove successful.

The agreement under negotiation would give the Government of China around 7% of the enlarged group, according to sources in the banking sector. In addition, Temasek, which is owned by the Government of Singapore, would hold around 3%.

If Barclays are unsuccessful in their quest to acquire ABN Amro, China’s newly created investment authority and Temasek would still acquire shares in Barclays but on a lesser scale.

Recently, China has highlighted changes in its foreign investment policy and is rumoured to be interested in buying significant stakes in overseas companies. The country has $1.2 trillion of foreign exchange reserves, the bulk of which has been placed in Government bonds or US Treasury.

Acquiring a 7% interest in the entity formed by the merger of Barclays and ABN is likely to cause concerns in Western financial institutions, particularly with Barclays shareholders.

The US private equity firm, Blackstone, is said to be key in brokering the deal.

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