Barclays Global Investors Canada Limited (TSX: XBB)(TSX: XCB)(TSX:
XCG)(TSX: XCV)(TSX: XDV)(TSX: XEG)(TSX: XFN)(TSX: XGB)(TSX:
XGD)(TSX: XIC)(TSX: XIN)(TSX: XIT)(TSX: XIU)(TSX: XLB)(TSX:
XMA)(TSX: XMD)(TSX: XRB)(TSX: XRE)(TSX: XSB)(TSX: XSP)(TSX:
XTR)(TSX: XSU)(TSX: XEN)(TSX: XCS)(TSX: XCR)(TSX: XGR)(TSX:
XGC)(TSX: XAL) -
The Board of Directors of Barclays PLC today announces agreement
for the sale of its iShares business ("iShares") to Blue Sparkle LP
("Bidco"), a new limited partnership established by CVC Capital
Partners Group SICAV-FIS S.A. ("CVC"), for a total consideration of
approximately US$4.4 billion (Pounds Sterling 3.0 billion).
The transaction will:
- Allow Barclays to crystallise significant value through the
realisation of an expected net gain on sale of US$2.2 billion
(Pounds Sterling 1.5 billion), taking into consideration goodwill
of US$1.4 billion (Pounds Sterling 1.0 billion), from a business
grown largely organically over the last five years;
- Give Barclays the opportunity to maximise value through the
sale of a business which represents a distinct channel for Barclays
Global Investors ("BGI") and which now has the scale, depth of
client relationships and brand equity to continue to be successful
on a standalone basis;
- Provide Barclays the opportunity to participate in future
value creation through a continuing commercial relationship with
the iShares business and the potential crystallisation of
consideration through a cash-settled participation interest
entitling Barclays to receive a portion of the value uplift on
iShares if certain performance-related hurdles are met; and
- Enhance the capital position of Barclays, adding an estimated
54 bps to Equity Tier 1 pro forma as at 31 December 2008. Taking
into account the expected net gain on the sale of iShares,
conversion of the Mandatorily Convertible Notes issued in November
2008 and all innovative Tier 1 capital, on a pro forma basis,
Barclays would have reported an estimated Tier 1 ratio of 10.3 %
and an estimated Equity Tier 1 ratio of 7.2 % as at 31 December
2008.
Under the transaction agreement, for a period of at least 45
business days from 15 April 2009, Barclays may solicit proposals
for iShares and potentially other related businesses from third
parties. There can be no assurance that the solicitation of
proposals will result in any superior alternative transaction being
agreed.
iShares is a leading global provider of exchange traded funds
("ETFs") and forms part of BGI. Following the transaction, BGI will
remain one of the world's largest asset managers. This scale,
combined with deep client relationships and strong investment
capabilities, offers significant opportunities for the growth of
BGI's presence and share of supply in institutional asset
management. BGI will retain all of its securities lending
business.
The consideration of US$4.4 billion (Pounds Sterling 3.0
billion), which includes the Barclays cash-settled participation
interest, represents a multiple of 10.1x 2008 EBITDA of iShares and
is made up as follows:
US$ billion Nominal Value
Equity 1.05 1.05
Senior debt 1.70 1.70
Vendor loan 1.40 1.10
Participation interest n/a 0.52
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Total 4.37
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The net proceeds of the transaction, after costs and assuming
the distribution of a dividend to the minority shareholders in BGI
comprising current and former employees, will be retained by
Barclays and contributed to capital resources. The transaction is
subject to receipt of regulatory and other approvals.
The debt financing for the transaction will be provided by
Barclays in the amount of approximately US$3.1 billion (Pounds
Sterling 2.1 billion). Barclays has agreed to hold no less than 51%
of the total financing for the first five years and may syndicate
the remaining 49% after the first year. The remainder of the
consideration will be funded by equity provided by Bidco.
Commenting on the transaction, John Varley, Group Chief
Executive of Barclays, said:
"This transaction realises significant value for Barclays.
iShares has experienced rapid growth over the past several years
and has reached a point where it can develop further on a
standalone basis. Barclays shareholders will benefit from a
reinforcement of our capital base and an ongoing commercial
relationship with iShares."
Details of the transaction
1. Transaction terms
The consideration of approximately US$4.4 billion (Pounds
Sterling 3.0 billion) will be subject to a price adjustment
mechanism based on the level of revenues and costs at the initial
closing relative to the 2009 business plan for iShares.
The breakdown of total consideration of US$4.4bn is shown
above.
The services which are currently provided by BGI to iShares as
part of the Barclays Group will either be separated through the
direct transfer of readily separable services on completion or
provided, at least for an initial period, pursuant to transitional
service agreements which will be entered into prior to completion.
CVC and iShares will also establish commercial agreements in
relation to a range of services which Barclays will continue to
provide on an ongoing basis following completion, including in
respect of securities lending.
The transaction is not expected to have any impact on the ETFs
provided by iShares nor on the holders of ETFs.
2. Financial information
31 December 2008 BGI iShares Net BGI
Pounds Pounds Pounds
Sterling m Sterling m Sterling m
Total Income 1,844 658 1,186
Operating Expenses
(excl. Liquidity Support) (986) (370) (616)
Liquidity Support (263) - (263)
Operating Expenses (1,249) (370) (879)
Profit before tax 595 288 307
EBITDA 673 294 379
Total Assets 71,340 465 70,875
AUM (Pounds Sterling bn) 1,040 226 814
Note: The financial information relating to iShares has been extracted from
the financial records of BGI, a business segment of Barclays PLC. The
financial information for BGI is as reported for BGI in the segmental
reporting set out in the 2008 financial statements of Barclays PLC
3. Go-shop provision
Barclays has the benefit of a go-shop period, which expires no
earlier than 18 June 2009, 45 business days from 15 April 2009.
During this period Barclays can solicit or consider proposals for a
superior transaction involving iShares and potentially other
related businesses.
A go-shop break fee of US$175 million (Pounds Sterling 120
million) would be payable by BGI to Bidco if BGI terminates the
transaction agreement and agrees to any superior transaction with a
party other than CVC involving iShares, and potentially other
related businesses, and which is not matched by CVC within five
business days.
Details of a superior transaction, if any, agreed during the
go-shop period would be communicated in a separate
announcement.
4. Employees and management
At the end of 2008, the iShares business had approximately 620
employees (excluding contractors and support staff) across 14
countries and five continents.
A number of employees are shareholders in BGI UK Holdings
Limited ("BGI Holdings"), which is the main holding company for BGI
(including the iShares business) within Barclays. These
shareholders purchased their shares through the BGI Equity
Ownership Plan ("EOP"). The EOP shares now represent 4.5% of the
share capital of BGI Holdings. The EOP was approved by Barclays
shareholders in 2000. It is currently envisaged that employees who
are shareholders in BGI Holdings will receive a cash dividend on
their shares as a consequence of the transaction in respect of a
proportion of the transaction proceeds. The payment of the dividend
will in effect release part of the value of their shareholding.
Some employees hold options under the EOP and it is currently
expected that those with vested options will have the opportunity
to exercise those options to obtain BGI Holdings shares ahead of
completion of the transaction. Should all the vested options be
exercised, the EOP shares would increase from 4.5% to represent
10.3% of the share capital of BGI Holdings. Such shares arising on
exercise of options may also carry the right to receive a dividend
in respect of a proportion of the transaction proceeds.
Robert E. Diamond Jr, President of Barclays PLC and Chief
Executive of Investment Banking and Investment Management, holds
shares in BGI Holdings which he purchased through his participation
in the EOP. His participation in the EOP predates his appointment
to the Board of Barclays PLC in June 2005. As a BGI Holdings
shareholder and option holder, he may receive a cash dividend (net
of a US$2.9 million (Pounds Sterling 2.0 million) payment required
in consideration of his options) on his BGI Holdings shares of up
to approximately US$6.9 million (Pounds Sterling 4.7 million)
before any applicable deductions.
Mr Diamond has taken no part in the consideration of the iShares
transaction either as a member of the Board or as a director of BGI
Holdings.
The members of the iShares core management team who are expected
to constitute the iShares core management team following the
completion of this transaction are:
- Lee Kranefuss
- Mike Latham
- Rory Tobin
The majority of the remaining employees working within the
iShares business are also expected to transfer with iShares as part
of this transaction.
5. Financing
Barclays will provide Bidco with debt financing in connection
with the transaction through: (i) a six-year senior secured term
loan facility of approximately US$850 million (Pounds Sterling 580
million) at a spread of 4.0% over the London Interbank Offered Rate
("LIBOR"); (ii) a seven-year senior unsecured loan facility with a
bullet repayment of approximately US$850 million (Pounds Sterling
580 million) at a spread of 5.5% over LIBOR; and (iii) a ten-year
vendor loan with a principal amount of approximately US$1,400
million (Pounds Sterling 956 million), with a mandatory payment in
kind interest mechanism at 7.0%. The remaining US$1,050 million
(Pounds Sterling 717 million) of financing will consist of equity
provided by Bidco.
Barclays has agreed to hold no less than 51% of each facility
for the first five years and may syndicate the remaining 49% after
the first year. Barclays has certain rights to modify some of the
financing terms (including pricing of the senior unsecured term
loan) at the time of syndication.
The debt financing provided by Barclays is expected to add
US$4.0 billion (Pounds Sterling 2.7 billion) of risk weighted
assets to Barclays PLC's balance sheet.
6. Barclays participation interest
Under the transaction agreement, CVC will grant Barclays a
participation interest which will entitle Barclays to receive, in
cash, 20% of the value of the equity return from the iShares
business received by CVC on realisation after CVC has achieved a
minimum return of no less than: (i) in the first two years, 2.0
times, and thereafter 2.5 times its equity investment; and (ii) a
25% internal rate of return from the iShares business.
7. Closing requirements
Closing is conditional upon obtaining regulatory approvals and
is expected to occur in several stages. Before the initial closing
can take place regulatory approvals must have been received in the
US, Germany, the UK and Ireland, and shareholder approvals must
have been obtained in respect of US-registered iShares funds whose
assets represent at least 85% of the assets under management as of
31 December 2008 of all such funds. The initial closing is expected
to take place in the third quarter of 2009. Subsequent closings
will occur in respect of iShares operations in other jurisdictions
on a country by country basis once appropriate regulatory approvals
and other necessary conditions have been obtained.
Currently, pre-closing regulatory approvals are expected to be
required in the US, UK, Germany, Ireland, Australia, Brazil,
Canada, Mexico, Chile, Hong Kong, Japan and Singapore.
Termination rights exist for both parties in the event that
there is a material change in the business before closing or if a
separation plan for the businesses being sold is not agreed.
Termination would entitle CVC to a payment of US$25 million.
A fee of US$50 million (Pounds Sterling 34 million) or US$175
million (Pounds Sterling 120 million) will be payable by CVC or
Barclays respectively if closing does not occur due to a material
default of CVC or Barclays, as the case may be, in certain
circumstances.
8. Expected timetable of principal events
The expected timetable of the principal events is set out below:
Commencement of go-shop period 15 April 2009
Conclusion of go-shop period 18 June 2009
Anticipated initial closing Third quarter 2009
Anticipated final closing November 2009
The timetable is included for illustrative purposes only and may be subject
to change.
9. Advisers
Barclays Capital is acting as lead financial adviser to Barclays
and Lazard & Co., Limited ("Lazard") is acting as financial
adviser to Barclays. Clifford Chance LLP and Sullivan &
Cromwell LLP are acting as legal advisers to Barclays.
As previously disclosed in Barclays Annual Report 2008, Sir John
Sunderland, Non-executive Director of Barclays, is currently an
Adviser to CVC. Sir John Sunderland notified the Board of Barclays
PLC of his interest in the disposal of iShares pursuant to section
177 of the Companies Act 2006. He has not been involved in advising
CVC on the disposal.
About Barclays
Barclays is a major global financial services provider engaged
in retail and commercial banking, credit cards, investment banking,
wealth management and investment management services with an
extensive international presence in Europe, the USA, Africa and
Asia. With over 300 years of history and expertise in banking,
Barclays operates in over 50 countries and employs approximately
156,000 people. Barclays moves, lends, invests and protects money
for 48 million customers and clients worldwide. For further
information about Barclays, please visit our website
www.barclays.com.
About BGI
BGI is one of the world's largest asset managers and a leading
global provider of investment management products and services with
more than 3,000 institutional clients and US$1.5 trillion of assets
under management as at 31st December 2008. BGI transformed the
investment industry by creating the first index strategy in 1971
and the first quantitative active strategy in 1979. BGI is one of
the global product leaders in exchange traded funds (iShares�
exchange traded funds) with over 360 funds globally across
equities, fixed income and commodities which trade on 18 exchanges
worldwide. iShares' customer base consists of the institutional
segment of pension plans and fund managers, as well as the retail
segment of financial advisors and high net worth individuals.
About CVC
Founded in 1981, CVC is a leading global private equity and
investment advisory firm, headquartered in Luxembourg with a
network of 19 offices across Europe, Asia and the USA. CVC focuses
on building businesses over the long-term, typically holding
investments for five years or more. CVC funds currently own 52
companies worldwide employing approximately 447,000 people in
numerous countries. Together these companies have combined annual
sales of EUR 88.0 billion.
Exchange rates used
The exchange rate used in this announcement is Pounds Sterling 1
equals US$1.4644 as published by Thomson Reuters at the close of
trading on 8 April 2009.
Nothing in this announcement is intended or is to be construed
as a profit forecast or to be interpreted to mean that earnings per
Barclays share for the current or future financial years, or those
of the enlarged group, will necessarily match or exceed the
historical published earnings per Barclays share.
This announcement is for information only and shall not
constitute an offer to sell, or a solicitation of offers to
purchase or subscribe for, any securities. The securities referred
to herein have not been, and will not be, registered under the
Securities Act of 1933, as amended, and may not be offered or sold
in the United States absent registration or an applicable exemption
from registration requirements.
Forward-looking Statements
This announcement contains (or may contain) certain
forward-looking statements within the meaning of Section 21E of the
US Securities Exchange Act of 1934 and Section 27A of the US
Securities Act of 1933 with respect to certain of Barclays plans
and its current goals and expectations relating to its future
financial condition and performance and which involve a number of
risks and uncertainties. Barclays cautions readers that no
forward-looking statement is a guarantee of future performance and
that actual results could differ materially from those contained in
the forward-looking statements. These forward-looking statements
can be identified by the fact that they do not relate only to
historical or current facts. Forward-looking statements sometimes
use words such as 'will', 'would', 'could', 'aim', 'anticipate',
'target', 'expect', 'envisage', 'estimate', 'intend', 'intention',
'plan', 'goal', 'believe', or other words of similar meaning.
Examples of forward-looking statements include, among others,
statements regarding Barclays future financial position, income
growth, profit before tax, impairment charges, business strategy,
projected levels of growth in the banking and financial markets,
projected costs, estimates of capital expenditure, expected capital
ratios, plans with respect to dividend payments, and plans and
objectives for future operations of Barclays and other statements
that are not historical fact.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances,
including, but not limited to, UK domestic and global economic and
business conditions, the effects of continued volatility in credit
markets, liquidity conditions in the market, market-related risks
such as changes in interest rates and exchange rates, effects of
changes in valuation of credit market exposures, changes in
valuation of issued notes, the policies and actions of governmental
and regulatory authorities, changes in legislation, the further
development of standards and interpretations under International
Financial Reporting Standards ('IFRS') applicable to past, current
and future periods, evolving practices with regard to the
interpretation and application of standards under IFRS, progress in
the integration of the Lehman Brothers North American businesses
into the enlarged group's business and the quantification of the
benefits resulting from such acquisition, the outcome of pending
and future litigation, the success of future acquisitions and other
strategic transactions and the impact of competition, a number of
which factors are beyond Barclays control. As a result, Barclays
actual future results may differ materially from the plans, goals,
and expectations set forth in Barclays forward-looking statements.
Any forward-looking statements made herein by or on behalf of
Barclays speak only as of the date they are made. Except as
required by the Financial Services Authority, the London Stock
Exchange or applicable law, Barclays expressly disclaims any
obligation or undertaking to release publicly any updates or
revisions to any forward-looking statements contained in this
announcement to reflect any changes in Barclays expectations with
regard thereto or any changes in events, conditions or
circumstances on which any such statement is based. The reader
should, however, consult any additional disclosures that Barclays
has made or may make in documents it has filed or may file with the
Securities and Exchange Commission.
Notwithstanding anything in this announcement to the contrary,
there is and can be no assurance that the transaction announced (or
any part thereof) will be consummated in the manner described
herein.
Lazard is acting exclusively for Barclays and for no-one else in
relation to the sale of iShares, and will not be responsible to any
other person for providing the protections afforded to clients of
Lazard nor for providing advice in connection with the sale of
iShares.
JPMorgan Cazenove, which is authorised and regulated in the
United Kingdom by the Financial Services Authority, is acting for
Barclays and for no-one else in connection with the sale of
iShares, and will not be responsible to anyone other than Barclays
for proving the protections afforded to customers of JPMorgan
Cazenove nor for providing advice to any other person in relation
to the sale of iShares.
Neither the content of Barclays website nor any website
accessible by hyperlinks on Barclays website is incorporated in, or
forms any part of, this announcement.
Contacts: ANALYST AND INVESTOR INFORMATION Barclays Stephen
Jones, Investor Relations +44 (0) 20 7116 5752 Barclays Alistair
Smith, Media Relations +44 (0) 20 7116 6132
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