ISHARES SOLD FOR $5 BILLION – Sunday, March 22, 2009

sold1 Hellman & Friedman May Offer $5 Billion for Barclays’ iShares

Hellman & Friedman LLC is putting together a group of private-equity groups that may bid for Barclays Plc’s iShares unit in a transaction valued at as much as $5 billion, a person with knowledge of the situation said.

Barclays, the U.K.’s third-largest bank, has set a deadline for offers for the end of this week, said the person, who declined to be identified because the talks are private. The lender may finance as much as 80 percent of the sale price of the iShares unit, the Wall Street Journal reported yesterday.

Barclays is exploring the sale of iShares, a unit of its fund management arm, as it tries to bolster capital without turning over a stake to the British government. The London-based company said March 16 that it had begun talks with the Treasury about taking part in an insurance program capping losses on toxic assets.

“The sale gives Barclays scope to take part in the asset protection scheme,” said Simon Willis, an analyst at NCB Stockbrokers Ltd. in London who has a “reduce” rating on the stock. “In more normal circumstances it would be viewed as a strategically important asset, but this is a pragmatic decision to raise money.”

San Francisco-based Hellman & Friedman raised $8.4 billion for its latest fund, which closed in April 2007. The firm already owns U.K. fund manager Gartmore Investment Management Ltd. With Bain Capital LLC, it jointly bid for bankrupt Lehman Brothers Holdings Inc.’s asset-management unit, only to be topped in December by an offer from the unit’s executives.

Asset Insurance

A New York-based Hellman & Friedman spokesman declined to comment on the possible bid. Nicola Hankey, a Barclays’ spokeswoman, declined to comment when contacted by Bloomberg News today.

IShares is the biggest manager of exchange-traded funds. Barclays Global Investors had 1.04 trillion pounds ($1.5 trillion) of funds under management at the end of 2008, including 226 billion pounds at iShares. Exchange-traded funds are mutual funds that trade on stock exchanges and don’t have a fixed number of shares.

The U.K. government has offered to insure the distressed assets of banks to spur lending and jumpstart the economy. Banks have until March 31 to enter the asset protection program.

Barclays has fallen 32 percent this year on concern it may need to raise more capital to cushion against further credit losses as the recession deepens. The bank has been hurt by speculation it hasn’t marked down toxic assets to the same extent as its peers.

Participation in the government’s insurance program will be based on the “economic merits” for shareholders, Barclays said. It will only enter the program if it can pay the fees in cash and avoid giving a stake to the government, Willis said.

Source:   Edward Evans and Andrew MacAskill

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