Barclays mulls BPE spin-out, secondary sales

As the mid-market firm deploys its €2.4bn Fund III, its parent has considered spinning out the private equity arm as well as potential sales of interests in its existing funds.

Barclays Private Equity may soon be added to the long list of in-house private equity arms to have become independent of their banking parents.

The possibility of Barclays selling off the 23-year-old mid-market private equity unit was recently raised again with investors, though there is neither a specific plan nor a timeline for developing one under consideration, a source familiar with the situation said. Any potential spin-out would not be driven by current economic conditions, the person added.

One possible scenario broached would involve the bank selling roughly 40 percent of BPE to a senior management team led by BPE chief executive Rodger Jenkins and the group’s UK co-head, Paul Goodson, according to a report in UK newspaper The Times.

Barclays is also reportedly considering the sale of some of its interests in BPE funds. The bank most recently committed €650 million to the firm’s third European fund, which closed on €2.4 billion in September 2007.

BPE typically invests around €750 million each year in 10 to 15 deals. The firm last month partnered with Investcorp to purchase Italy’s N&W Global Vending, Europe’s largest food and beverage vending machine maker, from Merrill Lynch Global Private Equity and Argan Capital. The €800 million deal notably included €600 million-worth of debt arranged by six European lenders.

In addition to mid-market private equity deals, BPE also invests in infrastructure. Since 1996, it has raised more than £1 billion across five infrastructure funds.

Should the firm eventually become independent of Barclays, it would be among a host of former in-house groups to spin out. The most recent example in the UK is Close Brothers Private Equity, which independent of its parent will be called CBPE Capital.

Other firms to have spun out of banks include AAC Capital, the former captive of Dutch group ABN AMRO; Montagu Private Equity, originally part of HSBC; Metalmark Capital, formerly a Morgan Stanley division; ex-JPMorgan captives CCMP Capital Advisors and Unitas Capital, formerly known as CCMP Capital Asia; and former Deutsche Bank groups MidOcean Partners and DB Capital Partners, now called Propel Investments.