Barclays reaches next stage in Citi's Egg sell-off

BARCLAYS is believed to have made it into the second round of bidding for Egg, the internet banking pioneer with some two million customers.

Egg has been put up for sale by Citigroup, the US banking giant that paid 575 million to buy it from Prudential in January 2007. Citi, under pressure to repay bail-out loans to the US government, has put the UK credit card business up for sale.

Sources said Egg is expected to fetch about 400m, though Citi originally hoped it might achieve closer to the 500m mark. Bidders were reportedly told this week whether they had made it to the next round.

It remains unclear who else might be in the running, though private equity group Blackstone is thought to there. Barclays and Citigroup both declined yesterday to comment on the sale.

Barclays is considering merging Egg with its Barclaycard credit operation, which includes businesses in Italy and Portugal bought from Citi earlier this year. Last year, Barclays bought Standard Life Bank, which it purchased from its life-insurance parent for 226m.

Barclays will be keen to pay a bargain price for Egg - it bought Standard Life Bank, at a discount to net asset value. Despite its iconic status in the UK, Egg has almost always been loss-making.

It opened in 1998 and was in the vanguard of the online-only banking model later repeated around the world. Prudential floated Egg in 2000, but kept a stake that it later sold to Citi, who beat off other avid bidders including RBS.

At the time, Prudential shareholders were upset that the business had not been sold sooner. The original price was eventually cut by 30m because of Egg's increasing debts.

Like RBS, Citigroup was split into a "good" and "bad" bank after its US government bail-out. It has placed all of its non-core businesses, including Egg, into a portfolio known as Citi Holdings.

l The main Middle East investor who pumped billions of pounds into Barclays two years ago has locked in a profit of about 3 billion after a complex deal that sent the bank's shares lower.

The sale came as concern mounted that income at Barclays Capital, the investment bank, will be below expectations for the third quarter and possibly next year.

PCP3, a vehicle of Sheikh Mansour Bin Zayed Al Nahyan, a member of Abu Dhabi's ruling family and the owner of English soccer team Manchester City, exercised 131.6 million warrants in Barclays late on Thursday and simultaneously entered into a hedging arrangement with Nomura. The deal leaves Sheikh Mansour with a 6.3 percent holding in Barclays.