According to Reuters, the deal, which will reap £3 billion ($4.41 billion), brings in cash Barclays can use to increase its buffer against credit losses as the economy worsens. Barclays also has an option to receive 20% of the value of iShares in cash following a future increase in the value of the business.
To complete the deal, the bank agreed to lend CVC £2.1 billion (see “WSJ: Barclays Ready to Announce iShares Deal’). Reuters noted that the sell represents a sacrifice for Barclays, underscoring the bank’s eagerness to raise cash and avoid seeking state aid as some of its rivals have done. The iShares unit, offering some 360 ETFs globally, contributed a significant chunk of the bank’s profits in 2008, the news report said.
The sale caps several weeks of talks with a variety of interested buyers, with CVC coming into the game late (see “Report: CVC Capital in Talks to Buy iShares’).