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Wednesday 16th of June 2010
May 15, 2009    

Barclays in talks to sell BGI

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by Kay Murchie

Barclays is in negotiations to sell its asset management division, Barclays Global Investors (BGI) - which owns the iShares fund management operation.

BGI is one of the biggest money managers operating in more than a dozen countries and manages more than $1 trillion for investors around the world.

It is understood that one of the bidders for BGI is BlackRock, the US investment group with offers expected to be an estimated £6.5 billion.

Following the news, shares in the bank soared 10% in early trading.

It was reported last month that Barclays had agreed to sell off its iShares division to private equity firm, CVC Capital Partners, for £3 billion but under the terms of the agreement, Barclays had the right to seek a higher bidder within a 45 day period.

As a result, earlier this week, Barclays had received further offers for the business from private equity groups Apax, BC Partners and Hellman & Friedman, all looking to bid higher than the £3 billion offered by CVC.

However, should Barclays accept a higher offer during the 45 day period, it would have to pay a penalty of £120 million to CVC, while CVC would have to pay £34 million, should it choose to withdraw its offer.

Selling off the iShares division will strengthen Barclay’s balance sheet, despite ‘stress tests’ showing that the bank did not need extra capital.

Unlike its rivals, Barclays has so far turned down financial help from the Government, opting to go it alone last year by raising £7 billion from investors in Qatar and Abu Dhabi.

Furthermore, the bank has chosen not to participate in the Government‘s asset protection scheme, which insures against losses arising from toxic assets.

However, the sale of iShares now remains ongoing and Barclays will continue to accept bids until its deadline, but it is understood that offers could now be made on the group as a whole.

Barclays recently reported a 15% rise in pre-tax profits for the first three months of the year despite the financial maelstrom.

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