Barclays facing $1bn loss from BlackRock disposal
Barclays plans to crystallise a loss of up to $1bn (£630m) by selling its 20pc stake in fund manager BlackRock in a move that will boost the high street lender’s capital buffers.
Barclays acquired the 20pc stake in BlackRock as part of its sale of Barclays Global Investors in June 2009 By Philip Aldrick, Economics Editor
BST 21 May 2012
Barclays acquired the stake in June 2009 when it sold its in-house asset management business Barclays Global Investors (BGI) to BlackRock for $13.5bn. Under the terms of the deal, Barclays was paid $6.6bn in cash and $6.9bn in BlackRock shares.
Announcing the planned disposal, Barclays said its stake was valued at $6.1bn at BlackRock’s closing share price on Friday. However, bankers said Barclays would probably have to sell at a discount to the market price, given the scale of the offer. The pricing is expected to be completed within the next few days.
Although Barclays will crystallise a loss against the purchase price, it wrote down the stake last September to about $5.5bn to comply with accounting standards. As a result, it is likely to book a small gain that will boost its already strong 10.9pc core tier one capital buffer, releasing funds that could be used to increase business and household lending.
The decision appears to have been taken in anticipation of strict new Basel 3 capital rules due to come into effect from January next year. Because BlackRock is a financial services company, less of the $5.5bn book value of the shares will qualify as core capital under the new regulations – weakening the bank’s balance sheet and reducing the buffer against which new loans can be made.
The decision to sell seems to be an effort to avoid the negative capital effect of holding the shares instead of cash.
Under the terms of the deal, BlackRock has agreed to buy back $1bn of the offer. Bob Diamond, Barclays’ chief executive who joined the BlackRock board to speak for the bank’s one-fifth stake in the fund manager, is also likely relinquish his non-executive position as part of the deal.
Barclays Capital, Morgan Stanley, and Bank of America Merrill Lynch are acting as joint bookrunners in the offering.
Statistics: Posted by yoda — Mon May 21, 2012 7:03 am
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