BlackRock, started by former mortgage-bond trader Laurence Fink, agreed to buy back as much as $1bn of shares from Barclays as part of the transaction.
The sale of a stake in BlackRock, the world’s largest money manager with an estimated $3.6 trillion (£2.23tn) of assets under management, is expected to crystallise a loss for Barclays compared to the $6.9bn estimated value of the stake in 2009, which it took when the bank sold its money management division to the asset manager for about $15.2bn.
But as the value of the shares were written down last year, the deal is expected to deliver a small surplus that the bank can apply to profits and core capital, with strict new Basel III rules due to come into effect from January next year.
In September, Barclays’ investment in BlackRock was written down by £1.8bn to £3.4bn after BlackRock shares slipped 24 per cent in value.
It is expected that Barclays would probably have to sell at a discount to the $6.1bn market price, with pricing to be completed within the next few days.
Jeremy Batstone-Carr at brokers Charles Stanley said the sale was driven by upcoming regulation as it was “obvious” that the bank would need more cash on its books ahead of Basel III.
Selling the stake will also mean Barclays will not have to hold extra capital to support its holding in BlackRock. It has been estimated Barclays would be required to hold around £10bn in capital against it under rules due to come in by 2019.
Investors have also put pressure on the bank to boost its return on equity, particularly after a revolt by shareholders over executive pay. Close to 32 per cent of the bank’s shareholders failed to endorse the bank’s remuneration report, which saw the bank’s chief executive Bob Diamond handed a £17.7m pay package.
At its latest results in February, the bank said its 2011 return on equity fell to 6.6 per cent in 2011, from 6.8 per cent the previous year, and well below its 13 per cent target.
Batstone-Carr added that it was unlikely the sale would be sold to just one buyer. “It’s more likely to be a blend of City investors, possibly other fund management outfits, that will take smaller individual stakes in BlackRock.”
Diamond, who joined the BlackRock board in 2009, is also likely relinquish his non-executive position as part of the deal.
BlackRock, which holds pivotal stakes in all the companies that have suffered investor rebellions in recent weeks, has been one of the stronger fund manager critics of boardroom pay during what has been dubbed the “shareholder spring”.
Shares in Barclays rose 2.2 per cent to 180p.
Barclays Capital, Morgan Stanley, and Bank of America Merrill Lynch are acting as joint bookrunners in the offering.