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Barclays plans to raise £4.5 billion

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by Kay Mitchell

Barclays is the latest British bank in a fundraising move to improve its balance sheet.

The bank announced it plans to raise £4.5 billion ($8.8 billion) through a discounted share placing. However, unlike its rivals, Barclays is not issuing the new shares at a massive discount.

The plan is to sell shares to new investors such as the Qatar Investment Authority and Sumitomo Mitsui Banking Corporation.

The Qatar Investment Authority already has a presence in the UK, as it controls around a quarter of shares in supermarket giant Sainsbury’s.

Following the announcement, shares in Barclays increased 6% and was the highest climber in the FTSE 100 in opening trades. Other banking shares also rose as fears were eased that Barclays had secured new investors.

The Qatar Investment Authority, the state-owned investment arm of the Gulf state, is to invest £1.7 billion in Barclays, which will give it a 7.7% share in the business.

In addition, a separate Qatar company called Challenger, which is managed by Sheikh Hamad Bin Jassim Bin Jabr Al-Thani, is to invest £533 million in the group.

Meanwhile, Japan’s Sumitomo Mitsui Corporation has agreed to buy £500 million in new shares.

Existing investors China Development Bank and Singapore investment firm Temasek will buy enough new shares to keep their holdings at 3% and 2% respectively.

Barclays chief executive, John Varley, said through the fundraising, our capital base will be strengthened and we will have extra resources to pursue our strategy of growth through earnings diversification.

Other British banks are seeking extra cash from their shareholders in a bid to shore up their balance sheets. RBS Group has already raised around £12 billion while HBOS is seeking to raise £4 billion.

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News posted: June 25, 2008

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