Barclays Mulls PE Unit Sale

LONDON (Reuters) – British bank Barclays Plc (BARC.L) is considering the sale of its private equity business and will meet investment partners this week to discuss the issue, several people familiar with the matter said.

Barclays Private Equity (BPE) is a mid-market investor that has invested in over 350 businesses since its formation in 1979.

A sale of the business has been rumoured since last year, including a possible management buyout where Barclays would retain a stake.

Barclays said it regularly assesses the value of the business to the group, but declined to comment further.

Private equity firms have been hit hard by the financial crisis, which has seen available credit dry up and asset valuations fall sharply.

The business could fetch a “couple of hundred million pounds”, according to two of the sources, but that would depend on how many of BPE’s investments may be included, and what type of stake Barclays may keep.

A deal would follow Barclays’ sale of its fund management arm Barclays Global Investors last month to BlackRock for $13.5 billion. Shareholders are due to vote on that deal next month, which will boost the bank’s capital and has removed most worries about the strength of its balance sheet.

BPE’s investment capital comes from a range of institutional investors and from investment bank arm Barclays Capital.

It is currently investing a 2.4 billion euro ($3.4 billion) fund it raised in 2007. BarCap committed 650 million euros for that fund, and over 1.7 billion euros came from 25 investors, with 70 percent from Europe. Commitments came from funds managed by Allianz Private Equity Partners, LGT Capital Partners, Morley Fund Management and Standard Life Investments.

BPE, which has a team of 45 investment professionals in five countries, typically invests between 10 million and 200 million euros per deal, in companies with a value of up to 500 million euros.

In Britain it has focused on consumer and travel, financial services, support services and healthcare sectors. It also has an infrastructure arm that invests mainly in UK government PFI and PPP projects.

(Reporting by Steve Slater and Victoria Howley; Editing by David Cowell)