“Go Shop” clause pays off for Barclays

June 8, 2009

Barclays‘ seemingly never-ending effort to get top dollar for its Barclays Global Investors unit appears to be enticing some Middle East money behind the current best bid from U.S. fund manager BlackRock, which is believed to be in the neighborhood of $12 billion.

Barclays said it had received proposals for BGI and iShares from a number of parties, including BlackRock, and was continuing talks. BlackRock confirmed the talks, but both sides said issues remained that could derail a deal. San Francisco-based BGI is the world’s biggest fund manager, with $1.5 trillion in assets under management and would more than double the size of BlackRock.

With Bank of New York Mellon also in the hunt, sources say Barclays may keep a hand in the game after a sale, possibly taking a stake of up to 20 percent in the enlarged asset manager. Media reports say BlackRock may get funding from Middle East investors, possibly including some Barclays shareholders. The Qatar Investment Authority and Adia, the government investment arm of Abu Dhabi, are in talks alongside Kuwait’s KIO to inject $3 billion into BlackRock for a 12 percent stake, the UK’s Sunday Telegraph newspaper said.

In April Barclays agreed to sell iShares, which is part of BGI, to buyout house CVC for $4.4 billion, but a “go shop” clause allows it to seek higher offers until June 18. So even if a deal is struck this week, the BGI sale may continue to dominate headlines for another week and a half.

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