Barclays buyout firm plans MBO and new fund: sources

LONDON (Reuters) - Barclays Private Equity (PE) is set to spin out of bank ownership this summer ahead of a new fundraising from the mid-market buyout specialist in the autumn, people familiar with the situation said.

Barclays PE is one of the few remaining buyout firms under bank control, but talks have been going on for over a year between the bank, the private equity division's management and its investors about a possible spin-off.

Those talks are likely to result in a deal this summer, sources said, with Barclays PE management pushing for a deal in order to embark on their next fundraising round.

Analysts in the private equity investor community believe the 2.4 billion euro ($3 billion) fund raised in 2007 would be the last under the Barclays umbrella.

With some 70 percent of that buyout pot invested in deals like Bounty, which sends out direct marketing packs to new mothers, and electrical engineering business Sicame, the firm is nearing the 75 percent level where raising a new fund typically starts.

A management buyout is likely to be worth a limited amount to Barclays, one of the sources said, but would underline its drive to focus on core areas. That has intensified as regulators clamp down on banks' involvement in higher risk businesses.

Britain's second biggest bank recently called a halt to new deals at Barclays Ventures, the small-cap buyout arm focusing on companies worth 10 million pounds ($14.4 million) to 50 million.

NEW FUND

Barclays PE will target between 1.5 billion and 2 billion euros for its first independent fund, sources said. It is unclear whether Barclays, which put 650 million euros into the last fund, will commit anything to the new one.

Separately Monday, sources with knowledge of the situation said part-nationalized Royal Bank of Scotland was in advanced talks over selling its European private equity fund portfolio with Dutch pension fund Alpinvest. It is separately in talks to sell its U.S. private equity fund portfolio.

RBS declined to comment and Alpinvest was not immediately available.

RBS, keen to win advisory and financing business at the height of the bubble, took stakes in private equity funds raised by groups such as Blackstone, Candover and Duke Street.

The Financial Times said in its report that the sale of the European unit -- already part of the portfolio of non-core assets RBS put up for sale after its bailout -- was worth around 400 million euros ($495 million). It said a deal could be announced in the next few weeks.

Private equity firms are working harder to raise the same amount of capital as during the buyout boom as cash-strapped investors tell them they have less to invest.

Buyout house BC Partners is set to launch a 5.9 billion euro fund launch later this year but expects to have to sign up more investors to achieve the same amount it raised in 2005.

Barclays PE also intends to focus on deals toward the lower end of its 50 million to 250 million pounds enterprise value range as it sees larger deals being more competitive and prices fuller, one of the sources said.

(Additional reporting by Steve Slater, Clara Ferreira-Marques and Gilbert Kreijger; Editing by Sharon Lindores and David Cowell)

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