Barclays Plc (BARC), the U.K.’s second- largest bank by assets, will sell its entire $6.1 billion stake in BlackRock Inc. (BLK) before the latest round of Basel rules stops it from counting the holding as capital.
BlackRock, the fund manager started by former mortgage-bond trader Laurence Fink, will buy back as much as $1 billion of shares from Barclays as part of the transaction, the London- based bank said in a statement today. The British bank took the 19.6 percent holding when it sold Barclays Global Investors to BlackRock in December 2009 for about $15.2 billion.
The latest round of rules from the Basel Committee on Banking Supervision will force the lender to set aside capital against the stake to cushion itself against any decline in the value of the holding. BlackRock has slipped 24 percent since the purchase, prompting Barclays to write down the value of its stake in 2011 to about £3.4 billion ($5.3 billion).
“It’s a less attractive asset under the Basel III rules,” said Ian Gordon, an analyst at Investec in London who rates the bank a buy. “Barclays can remove it from that debate.”
Barclays, Morgan Stanley (MS) and Bank of America Corp. are selling about 29 million shares to money managers, including the over-allotment option. They expect to set a price for the stock on May 23, according to a term-sheet for the offering.
BlackRock fell 1.2 percent to close at $171.91 in New York on May 18. Barclays rose 1.3 percent to 178.40 pence as of 11:24 a.m. in London trading today.
“BlackRock taking $1 billion of this gives Barclays a good anchor investor to start this,” said Christopher Wheeler, a London-based analyst at Mediobanca SpA. “What this does for Barclays is get rid of a lot of volatility in this holding.”
A further statement will be issued following the pricing of the offering, Barclays said.
Barclays Chief Executive Officer Robert Diamond will step down from BlackRock’s board following the sale, the fund manager said in a prospectus for the sale.
“BlackRock’s relationship with Barclays has always been strong and will remain so,” Brian Beades, a spokesman for BlackRock, said in an e-mailed statement today. “Our plan to repurchase shares demonstrates BlackRock’s commitment to effectively executing our capital management strategy and returning cash to shareholders through buybacks and dividends,” Bloomberg reported.
