LONDON (Reuters) – Barclays Plc has agreed to sell its iShares asset management business to private equity firm CVC Capital Partners for 3 billion pounds ($4.4 billion), but kept the right to hunt for a better deal for two months.
The deal, which will be 70 percent financed by Barclays, will land a windfall of up to 4.7 million pounds for Barclays President Bob Diamond, and millions for other staff.
Barclays said on Thursday it expects to achieve a net gain on the deal of 1.5 billion pounds, which will add about 54 basis points to its equity tier 1 capital ratio, lifting it to 7.2 percent.
That gives a boost to Barclays’ capital, which is lower than at its UK rivals, at a time when lenders are being encouraged to build up a cushion to prepare for rising bad debts.
Barclays shares were up 9.9 percent at 173.4 pence by 1430 GMT (10:30 a.m. EDT), one of the top performing UK stocks.
IShares is the leading exchange traded funds provider offering products that mimic the performance of an index. The fast-growing unit sits within Barclays Global Investors (BGI), the San Francisco-based asset management arm.
BGI staff will reap a windfall on the deal. They own 4.5 percent of the business under an equity ownership plan (EOP), which could rise to 10.3 percent if they exercise options. They will receive a cash dividend on the gain on iShares.
The bank said this could include up to 4.7 million pounds for Diamond, who heads BGI.
The British bank said last week it was in talks with CVC to sell iShares. The deal would be worth about 3 billion pounds, a person familiar with the matter told Reuters.
The UK bank has also been given a “go-shop” clause, where it can seek to get a better offer for iShares until June 18.
The unusual clause allows Barclays to ask other suitors if they want to trump CVC’s offer. Several companies or consortia showed interest in iShares, including Goldman Sachs, Bain Capital and a consortium of Hellman & Friedman and Apax Partners , sources have said.
Barclays will pay CVC 120 million pounds if it breaks the deal.
Barclays will provide 2.1 billion pounds of the financing for CVC, with the remainder provided by CVC. The bank is also entitled to receive 20 percent of the equity return from iShares once CVC has achieved certain minimum returns.
CVC, founded in 1981 and headquartered in Luxembourg, closed an 11 billion euro ($14.6 billion) fund at the start of this year, and had about 16 billion euros available including money available from previous funds.
Its financial institutions team was set up in September and is run by Jonathan Feuer, a long-time CVC partner involved in its successful buyouts of retailers Debenhams and Halfords.
Barclays Capital was lead adviser to Barclays on the deal, joined by Lazard as financial adviser.
By Steve Slater
(Additional reporting by Victoria Howley; Editing by Hans Peters and David Cowell)