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Written by Journal of Indexes Staff
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Monday, 20 April 2009 00:00 |
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As this issue went to press, Barclays was in talks with multiple parties over the possible sale of its iShares exchange-traded fund unit. iShares is the largest ETF manager in the world, with approximately $300 billion in assets under management worldwide. It was expected to fetch between $3 billion and $7 billion.
Barclays was considering the sale in an effort to avoid partial nationalization. The bank had until March 31 to decide whether it would join a U.K. government asset protection scheme that is designed to “ring-fence” toxic assets on bank balance sheets. The scheme calls for banks to pay the government an up-front fee in exchange for the Treasury taking on most of the risk from a given set of toxic assets. Banks like Lloyd’s and RBS have paid for participation in the scheme by selling stakes to the U.K. government.
Barclays was reluctant to follow that path, however, as it would likely mean ceding control of the bank. Not only would it give the public a say in how the bank is run (and how executives are paid), it could trigger a clause in a prior contract that would give majority ownership in the bank to a group of foreign investors.
As reported in the U.K.’s Daily Telegraph, in 2006, Barclays raised several billion dollars from the Abu Dhabi royal family and two Qatari investment funds, in a deal that saw them take ownership of 32 percent of the bank. Under the terms of the deal, if Barclays were to raise further money at a lower price before June 30, 2009, the Middle Eastern investors could convert their investment at that lower price. At current levels, that would give them majority control of the bank.
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