CVC emerges as exclusive iShares bidder

Buyout house CVC Capital Partners is in exclusive negotiations with British banking group Barclays to buy its iShares division, PEO has confirmed.

London-based CVC, which raised an €11 billion fund last year, is set to buy the ETF business for £3 billion (€3.2 billion; $4.3 billion), in a deal which would be between 60 and 70 percent financed by the seller, according to a report in this morning’s Financial Times.  Barclays will also receive warrants worth 20 percent of the equity in the buyout, giving it a share of the upside if the business increases in value, said the report.

Barclays: cashing in on ETF arm

The deal would not include iShares’s securities lending arm, a source close to the situation confirmed with PEO. The securities lending division would have brought with it additional regulatory requirements to the buyer.

Until the emergence of CVC, bidders included investment bank Goldman Sachs and a private equity consortium led by Hellman & Friedman.

ETFs – or exchange traded funds – are listed investment vehicles popular among investors because they typically offer the diversification, low expense ratios, and tax efficiency of index funds, while still maintaining all the features of ordinary stock.

iShares is a growing part of Barclays Global Investors (BGI) and now provides around 45 percent of its £1.84 billion in revenues. BGI is a subsidiary of the investment banking group Barclays Capital. Parent company Barclays Group has, unlike its rivals The Royal Bank of Scotland and Lloyds TSB, avoided giving up a stake to the UK government, instead choosing to raise more than £5 billion from Middle Eastern investors last year.