* UK bank says in talks with "number of parties"
* BlackRock frontrunner in possible $12 bln deal -sources
* Mideast investors to fund part of BlackRock deal -report
* Barclays shares down 2 pct
(Adds details, updates shares)
By Steve Slater
LONDON, June 8 Barclays Plc (BARC.L) is in talks
to sell Barclays Global Investors (BGI), the British bank said
on Monday, with U.S. fund manager BlackRock the frontrunner to
land the asset manager for about $12 billion.
BlackRock (BLK.N) and Bank of New York Mellon (BK.N) are
both in talks to buy BGI in a deal that might come early this
week, people familiar with the matter said.
The complex deal could see Barclays take a stake of up to 20
percent in the enlarged asset manager, according to the sources,
who asked not to be named as the talks are confidential.
"It sounds like a deal is coming and the price is undeniably
attractive," said Ian Gordon, analyst at Exane BNP Paribas.
"It's an opportunity to realise a premium price for a
business that has delivered exceptional growth but might be
expected to grow at a slower pace from here, and also bolster
capital ratios," he added.
Barclays said on Monday it had received proposals for BGI
and iShares from a number of parties, including BlackRock, and
was continuing talks. Blackrock also confirmed the talks but
both companies said issues remained that could derail a deal.
San Francisco-based BGI is the world's biggest fund manager
with $1.5 trillion in assets under management and would swell
BlackRock's assets to $2.8 trillion, double the amount managed
by nearest rival State Street (STT.N).
BGI is staffed by academics from a range of disciplines from
economics to engineering, attracting graduates from the nearby
University of California at Berkeley. They have helped the staid
index-tracking fund manager shift to more active and lucrative
management, and many will land windfalls if a deal is reached.
Barclays agreed to sell iShares, which is part of BGI, to
buy-out house CVC for $4.4 billion in April, but is allowed to
hunt for better offers until June 18. [ID:nL5232046]
By 1150 GMT Barclays shares were down 2 percent at 279.25
pence, underperforming a weaker European bank sector, and
valuing the bank at just under 24 billion pounds ($38 billion).
Bankers told Reuters last month that Barclays would likely
sell BGI if offers approached $12 billion. [ID:nLM314133]
BlackRock is likely to get funding for a deal from Middle
East investors, possibly including some Barclays shareholders,
according to media reports.
The Qatar Investment Authority (QIA) and Adia, the
government investment arm of Abu Dhabi, are in talks alongside
Kuwait's KIO to inject $3 billion into BlackRock for a 12
percent stake, the UK's Sunday Telegraph newspaper said.
BlackRock, founded in 1988, had a market value of just over
$21 billion at Friday's close. Bank of America (BAC.N) owns 49
percent of it, stemming from a 2006 deal when Merrill Lynch, now
owned by Bank of America, sold it its fund unit.
Also set to be diluted is PNC Financial Services Group
(PNC.N), the U.S. bank that owns 33 percent of BlackRock.
QIA bought shares in Barclays last year and could hold over
12 percent of the bank if debt notes and warrants are converted.
It said last week it remained a supportive shareholder,
after an Abu Dhabi fund made a $2.5 billion profit from selling
a stake. [ID:nL31035157]
Barclays is likely to get two seats on BlackRock's board if
it completes a deal, one of which is likely to go to Bob
Diamond, president of the bank and head of BGI, the Telegraph
A deal would land millions for Diamond and hundreds of BGI
employees due to a lucrative equity ownership plan dating back
to 2000, that could leave staff owning 10 percent of BGI worth
over $1 billion on paper.
An offer of $12 billion would represent 12.8 times last
year's pretax profit of 595 million pounds and 11.3 times
earnings before interest, tax, depreciation and amortisation
(EBITDA), above the 10.1 times EBITDA valuation on CVC's bid for
A sale of BGI would further boost Barclays' capital. Its
core Tier 1 ratio will rise to 7.2 percent under the planned
iShares sale, and selling BGI would lift the ratio to around 8
percent, analysts estimated.
CVC would have five days to match any rival offer for BGI or
iShares and gets a $175 million break fee if it is left out of
the deal. [ID:nLF70913]
(Editing by Greg Mahlich and David Cowell)