Sunday, 12 April 2009

Barclays deal

I have to admit I've not been following this one as closely as I should, but Pesto has and there's some incredible stuff in there:
But it's not a sale in the sense that most of us would recognise. Because it has lent the buyer, the private-equity house CVC, £2.1bn of the purchase price...

What's even more delightful for the purchaser, Barclays will pay CVC £120m if it rats on the deal by securing better terms from another bidder (there's also provision for both Barclays and CVC to receive between £34m and £120m if either side walks away for other reasons).

Is all this to simply avoid any state ownership? If so this independence is coming at a very high price.


Nick Drew said...

it is, of course, to avoid having to rein back their 'tax schemes' business lines, which have been v. lucrative

zedman said...

Why wouldn't Barclays finance the deal? A specific entity set up to buy and operate the business, so no legacy bad debts. Barclays gets the proceeds plus interest that they know is serviceable from an operating business.
CVC has uncertainty with the deal as Barclays has a lot of additional time to get a better deal done. CVC is providing in essence an expensive option which Barclays would only exercise if they get even better terms than CVC is offering. Plus Barclays keeps a 20% interest AND the securities lending business. Not a bad deal for Barclays if you ask me, and still value for CVC.
The reason Barclays hasn't needed govt support is because they know how to negotiate. They walked away from ABN AMRO rather than outbid RBS, and they walked away from Lehman on the weekend before its default. They subsequently bought Lehman US for a song.
Bonuses deserved - but not taken ...