Barclays looks to Middle East to shore up its balance sheet

| October 31, 2008 | 0 Comments

Barclays has declined financial assistance from the UK Government and is instead looking to raise £7.3 billion, primarily from Middle East investors.

The bank has secured a £5.8 billion cash injection from investors in Qatar and Abu Dhabi, and once the deal is finalised, the Middle Eastern investors will hold a 32% stake in Barclays.

Sheikh Mansour Bin Zayed Al Nahyan, a member of Abu Dhabi’s Royal Family, is investing up to £3.5 billion in the bank, meaning he will hold a 16.3% stake.

Meanwhile, Barclays is also raising up to £2 billion from Qatar Holdings and £300 million from Challenger, managed by Qatar’s Royal Family.

Furthermore, the bank is looking to raise a further £1.5 billion from existing institutional investors such as pension funds.

Earlier this month, it was announced that the UK Government would inject £20 billion into Royal Bank of Scotland, while a further £17 billion would be pumped into Lloyds TSB/HBOS.

Following the news, shares in Barclays rose but later fell as investors absorbed the idea. By late morning trade, the shares were down 9.14% at 186.5p.

Last year, Barclays raised funds from the China Development Bank and Singapore’s Temasek. With today’s announcement, more than 35% of Barclays is now owned by overseas investors.

It was suggested that Barclays was becoming too reliant on foreign investors but this was brushed aside by Chairman, Marcus Agius, who said this is a forward-looking and progressive approach to managing the share register, adding that these deals create new commercial opportunities around the world.

In related news, an announcement is due from the Government later today that it has approved the takeover of HBOS by Lloyds TSB.

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