Barclays sell-off plan will bolster finances

Dec 22 2008 By Graeme King, The Journal

BARCLAYS is said to be planning to sell off its private equity arm to management in a bid to strengthen its finances. The bank could also sell off around half of its private equity investments to raise funds, one report yesterday claimed.

The potential move comes amid concerns that UK banks may have to bolster their balance sheets with more cash next year as the recession deepens. Barclays shunned a taxpayer bail-out, but has raised more than £7bn through a fund-raising which leaves almost a third of the bank in the hands of Middle East investors.

According to the newspaper, Barclays could spin off its various private equity businesses into a new company 40% owned by the bank and 60% owned by its management. The bank’s private equity operations sit within the Barclays Capital investment banking business, which has been a key driver of profits in recent years. But the capital-intensive nature of the division comes at a time when bad debts are set to rise as the economy turns sour.

The Financial Services Authority watchdog is also keeping up the pressure on banks to maintain their balance sheet strength.

According to the report, the plans are at an early stage and being considered by Roger Jenkins, a Barclays Capital director and chief executive of Barclays Private Equity.

In the long term, Barclays could potentially sell its remaining 40% stake, valuing the overall business at around £3bn.

Barclays Private Equity was set up more than 25 years ago and has invested in more than 350 businesses. It typically spends around 750m (£696m) a year on 10-15 investments. Its current UK investments include business travel group ATP International, although in February it sold luxury shoe retailer Kurt Geiger after backing a management buy-out in 2005.

A spokesman for Barclays Private Equity declined to comment.