BlackRock sale to raise $5.5B for Barclays

Barclays plc said Wednesday, May 23, it expects to receive net proceeds of $5.5 billion from the sale of its 19.6% stake in BlackRock Inc. in a secondary offering.

The London institution late Tuesday priced the shares at $160 apiece, a 2.1% discount to the stock's $163.37 closing price Tuesday, as it sold a holding it acquired as part-payment for the New York fund manager's $15.2 billion takeover of Barclays Global Investors in December 2009.

The secondary offering comprised 35.2 million shares, or Barclays' entire BlackRock stake, including 6.4 million shares which BlackRock is buying back for $156.80 apiece, or $1 billion in total.

Barclays said it would post a gain of £200 million ($315.2 million) on the disposal, which will lift its core Tier 1 capital ratio by 5 basis points from 10.9% at the end of the first quarter.

"After careful consideration, we have decided that now is an appropriate time to release capital from this investment and reinvest it in our core businesses," said Barclays CFO Chris Lucas in a statement. "This demonstrates our focus on both proactive capital management and managing for maximum risk-adjusted shareholder returns."

The BlackRock shares were worth $227 apiece when Barclays acquired them in December 2009, or $8.4 billion in total, but in September Barclays put the fair value of the holding at £3.4 billion ($5.4 billion).

Analysts said that investors were assigning no worth to the BlackRock stake within Barclays' share price, and noted that the capital cost of keeping the asset would have risen under Basel III regulations.

"This disposal makes sense from a Basel 3 mitigation perspective and should reduce earnings volatility," wrote Oriel Securities Ltd.'s Hari Sivakumaran, who noted that the sale will dilute Barclays' tangible net asset value by an estimated 9 pence from 381 pence as of the end of the first quarter.

Barclays shares were down 4%, slightly more than other U.K. banking stocks, at 181.35 pence by late morning in London. At that price Barclays is worth £22.2 billion.

Barclays, Morgan Stanley and Bank of America Merrill Lynch were bookrunners in the BlackRock offering.