LONDON British bank Barclays (BARC.L) raised 4.5 billion pounds ($8.9 billion) from investors including Qatar and Japan's Sumitomo Mitsui (8316.T) and aims to use half the cash to rebuild capital and half to pursue growth.
Qatar's state investment firm and a member of its ruling family could become two of the biggest shareholders in Britain's third-biggest bank, with a combined stake of up to 10 percent, or over $4 billion.
But under the structure of the deal announced on Wednesday, existing shareholders will get the chance to buy up to 4 billion pounds of shares at a discount. What they don't buy, sovereign wealth funds from Qatar, China, Singapore and other "anchor" investors will take.
Barclays shares jumped 6.5 percent to close at 331 pence, boosting other bank stocks across Europe, as investors welcomed the completion of the well-flagged capital raising exercise. Barclays stock recently hit a 10-year low at 293p.
Barclays has lost more than $5 billion on assets hurt by the U.S. subprime crisis and credit crunch and said last week it planned to raise billions of pounds to rebuild its capital base.
"About half the capital will be directed at higher (capital) ratios and about half will be directed at new business opportunities," said Barclays Chief Executive John Varley.
The bank has one of the thinnest capital cushions among European banks. The fundraising would have increased its core tier 1 capital ratio to 6.3 percent at the end of last year, from the 5.1 percent it reported.
That ratio will stay above its target of 5.25 percent for "the foreseeable future" but will come down from 6.3 percent as cash is used for growth, possibly on acquisitions, Varley told reporters on a conference call.
Barclays said it intends to keep paying dividends in cash and the annual payout would be in line with last year's 34p per share until the dividend is more than twice covered by earnings.
The bank's fundraising will be through a placing and open offer of 1.4 billion new shares at 282 pence apiece, a 9.3 percent discount to Tuesday's closing price. Shareholders will be offered three new shares for every 14 held.
Another 500 million pounds will be raised through a placing to a unit of Japan's Sumitomo Mitsui Financial Group Inc (SMFG) of 169 million new shares at 296 pence, a 4.7 percent discount.
SMFG will get a 2 percent stake and a co-operation agreement will give it access to Barclays Capital's investment bank platform and its India and Pakistan footprint, while Barclays will be able to access a wider Japanese and Asian network for areas such as private banking.
Qatar investors are the biggest backers of the deal. Qatar Investment Authority (QIA) and Sheikh Hamad bin Jassim bin Jabr al-Thani, a member of the royal family, have agreed to invest up to 1.8 billion pounds and 533 million pounds respectively.
QIA invested in Swiss bank Credit Suisse CSGN.VX earlier this year and in February Sheikh Hamad said Qatar could spend as much as $15 billion on overseas banks in the next two years. The stake in Barclays was a step towards building up its portfolio in "quality financial institutions," a person familiar with the investor said.
Two major existing shareholders, China Development Bank CHDB.UL and Singapore state investor Temasek TEM.UL will invest 136 million pounds and up to 200 million pounds respectively. In addition, leading institutional shareholders and other investors will invest up to 1.3 billion pounds.
CDB and Temasek are investing at prices well below the 740 pence they paid for Barclays shares last summer.
Varley said he wouldn't rule out acquisitions, but is mainly focused on taking advantage of higher margins and problems the credit crunch has created among rivals.
Bob Diamond, head of investment bank Barclays Capital, said there was "a terrific opportunity" to grab market share on Wall Street as "six or seven" big U.S. banks have stepped back during the market turmoil.
Barclays has opened over 600 branches outside Britain this year and bought a bank in Russia and a UK credit card business, and Varley said it is taking "a substantially higher" share of UK mortgage lending.
Barclays' credit crunch-related losses are far lower than many rivals, and analysts said there remains concern that they haven't written off enough.
Diamond said the bank had better-quality assets, was managing risk better than rivals, and had avoided getting involved in many of the leveraged finance deals that had caused others to take big writedowns.
Varley said the bank considered a rights issue but the structure of its deal gave it "speed and certainty" that a rights issue couldn't provide.
Rival Royal Bank of Scotland (RBS.L) raised 12 billion pounds from a rights issue and HBOS HBOS.L is seeking 4 billion pounds from investors, but shares in both have endured a rocky ride during the lengthy rights process.
For a factbox on the deal's investors click on <ID:nL25128160>.
(Editing by Erica Billingham)