Deals & People April 8, 2009

WSJ: Barclays Ready to Announce iShares Deal

Barclays PLC is expected to announce as soon as tomorrow that it has reached an agreement to sell iShares.
Reported by
The Wall Street Journal, citing people familiar with the matter, says that Barclays’ iShares exchange-traded funds (ETF) business will be sold to European private-equity firm CVC Capital Partners. According to the report, the deal is likely to reap about £3 billion and leave Barclays with a roughly 20% stake in the business – cash that the British bank can use to increase its buffer against credit losses as the economy worsens.
The WSJ says that Barclays agreed to lend CVC as much as 70% of the purchase price.
Barclays hopes to announce the deal Thursday, but it could still be delayed, according to the report. The sale caps several weeks of talks with a variety of interested buyers, including, according to the WSJ, Goldman Sachs Group Inc., Bain Capital LLC, and Colony Capital LLC. Barclays said last week that CVC had emerged as the preferred bidder.
The WSJ said that people close to the matter initially indicated the deal could be completed last week – but that the details of separating the iShares unit from San Francisco-based Barclays Global Investors, the bank’s asset-management arm, proved to be more complicated than anticipated.
The iShares unit had £226 billion of assets under management at the end of last year.
Compliance April 8, 2009

Slimmed-Down Revenue-Sharing Case Gets Class OK

A federal judge in Illinois has ruled that employees challenging the fee levels in Lockheed Martin’s 401(k) plans can proceed as a class action.
Reported by

The employees claim the company didn’t properly monitor plan fees and that it did not properly administer the Stable Value Fund in the retirement programs.

U.S. District Judge Michael J. Reagan of the U.S. District Court for the Southern District of Illinois ruled that as many as 100,000 employees could be part of the class in the excessive-fee fiduciary breach suit. Plaintiffs are five Lockheed employees who are 401(k) employees (see “Fee Suit against Lockheed Martin to Move Forward“).

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Reagan refused Lockheed claims to dismiss three of the plaintiff’s original claims that the defendants committed a fiduciary breach by:

  • not making sure participants did not suffer adversely by excessive overall fees
  • failing to prudently administer the Stable Value Fund as an investment option
  • imprudently diluting returns in the company stock funds by unnecessarily holding cash or holding excessive amounts of cash in the funds.

Even though plaintiffs had asked all three issues be approved to be part of the class action, Reagan only certified the first two, according to his ruling.

According to Reagan, because the company stock funds were unitized, a small employee group was able to day trade, which, as the court pointed out, lowered the returns for other participants. The fund had to hold surplus cash to fund the day traders’ activities, the court said, which put the day traders’ financial status at odds with that of non-day traders. That difference made a class certification inappropriate, Reagan said.

Dropped from the case entirely were fiduciary breach claims that the company did not monitor revenue-sharing payments as well as a claim that Lockheed improperly offered a retail fund instead of an institutionally priced fund.

The case is Abbott v. Lockheed Martin Corp., S.D. Ill., No. 06-cv-0701-MJR.

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