Barclays to sell £3.8bn stake in BlackRock
BARCLAYS has decided to sell its $6.1bn (£3.8bn) stake in investment manager BlackRock because new regulatory requirements mean the asset cannot generate a decent return.
BlackRock itself has agreed to buy back $1bn of the stock, which Barclays acquired in 2009 in part-payment for its sale of Barclays Global Investors to BlackRock.
The bank has now done a cost-benefit analysis of holding on to the 19.6 per cent stake and concluded that the returns it will generate are well below the group’s 13 per cent target.
That is largely because under new Basel III capital rules, the equity in BlackRock is classified as highly risky and incurs a 250 per cent risk-weighting. In other words, the bank has to hold reserves against possible losses on the shares as if it held about £10bn worth of stock.
The bank is likely to make a small loss of around 10 cents per share on the disposal: it bought in at about $182 per share and is now selling at around $172, although exact pricing will be decided in the next week after a roadshow today and tomorrow. The deal is being run by Barclays’ investment bank alongside lead bookrunners Morgan Stanley and Bank of America/Merrill Lynch.
Barclays chief executive Bob Diamond will step down from the board of BlackRock three months after the sale is completed, though BlackRock will still own about 11 per cent of the bank, in large part through its array of tracker funds.