Barclays Shops BGI; iShares Deal Could be Redone
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Friday, May 15, 2009

Barclays Shops BGI; iShares Deal Could be Redone

Now that it has a buyer for iShares in hand, Barclays is shopping its BGI unit. The Wall Street Journal reports that the British bank may get as much as $12 billion for San Francisco-based Barclays Global Investors (BGI). The possible deal was also reported in the London-based Financial Times. That paper suggests the price may be closer to $10 billion.

Both papers report that New York-based Black Rock is the leading suitor for the BGI business which has nearly $1.5 trillion in assets under management. Another suitor named in the reports is Bank of New York Mellon. The FT adds that the deal talk was sparked by the auction of iShares last month and that Black Rock would take iShares as part of the deal for BGI.

FT's money quote comes from an anonymous source who says: "iShares is the beating heart of BGI. So as long as they were selling iShares, it made sense to sell it all."

The WSJ adds that the deal talks are in an "early stage" and that no final deal is imminent. One wrinkle could be payouts to top management. For example, BGI Chairman Bob Diamond is set to receive $6.9 million triggered by the sale of iShares alone.

Barclays is reportedly selling the U.S. asset management business as part of a bid to bolster its capital position. Barclays recently decided to opt out of a British government that will insure U.K. banks against credit losses.

In April, CVC Capital Partners agreed to a deal in which it would pay $4.6 billion for BGI's iShares unit that specializes in exchange-traded funds (ETFs). That deal is not yet final and their have been reports that other bidders may step forward for that unit also before the bidding period ends on June 18.

The WSJ reports that one new suitor for iShares could be The Vanguard Group. The paper did not identify its source. Meanwhile, the FT reports that two private equity firms -- BC Partners and Hellman & Friedman -- are prepping counter bids.

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