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
-------------
Total 4.37
-------------
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(R)
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.
iShares S&P TSX Global G... (TSX:XGD)
Historical Stock Chart
From Jul 2024 to Aug 2024
iShares S&P TSX Global G... (TSX:XGD)
Historical Stock Chart
From Aug 2023 to Aug 2024