Barclays considers daring takeover bid

Barclays considers daring takeover bid 

 

Bank rumoured to be eyeing Lehman or UBS

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British banking giant Barclays is considering making a daring takeover bid for a rival as part of a move to raise capital from shareholders.

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There has been intense speculation about whether Barclays will follow its rivals in raising capital to bolster its balance sheet, but the bank itself has remained enigmatic. Mr Chris Lucas, Barclays finance director, told analysts last week that “all options are open”.

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Guiding Barclays’ decision is understood to be a consideration about whether to try to take advantage of rivals’ weakness by launching a large rights issue with a double purpose: To improve its capital ratio and to fund an acquisition.

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Barclays’ top team feels that it has earned kudos with London by walking away from last year’s battlefor ABN Amro, which was bought by a consortium led by RBS for£47 billion ($125.5 billion). Barclays is thinking seriously about whether it can snap up a rival bank at a time when the shares of many banks are at record lows.

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Sources said Barclays could try to buy an investment bank. Its own investment banking arm, Barclays Capital, is run by Mr Bob Diamond — an ambitious American.

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In the past few weeks, he is thought to have looked at both America’s Lehman Brothers, which has traded as low as 60 per cent of its book value, and UBS, whose shares have also plummeted following its £18 billion of write-downs.

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One senior banking source said: “Bob is up to something.”

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Another said that after Mr Diamond had missed out on top jobs at Citigroup and Merrill Lynch, he wanted to go on the offensive with an expansion of Barclays Capital.

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Sources said that UBS would bring Barclays an equities business and its wealth management and private banking arms, which it would like to acquire. But UBS is still seen as being in the throes of a crisis and Barclays’ shareholders fear the Swiss giant may have to disclose further bad debts.

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The Government of Singapore Investment Corporation (GIC) now owns an effective 9.5-per-cent stake in UBS after providing the latter with funds in the wake of hefty sub-prime-related write-downs and losses.

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Lehman would add to Barclays Capital’s existing stronghold in the debt market — which could mean massive job cuts — but would bolster its presence in the United States. A Lehman deal is becoming increasingly difficult, sources pointed out, because there are signs that the US market is improving, raising the price of acquisitions there.

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Some believe Mr Diamond may not be able to persuade the Barclays board about the merits of an investment banking deal, particularly as Barclays Capital itself might have to write down further losses on investments. Mr Diamond may instead stick to bolstering his business by picking up teams of investment bankers from other institutions that are clamping down. Barclays Capital recently hired a senior team from ABN Amro.

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Barclays is understood to have consulted its shareholders about raising capital. Some believe it will raise about £3 billion.

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The bank is likely to approach China Development Bank and Singapore’s Temasek Holdings, which bought shares last year as part of Barclays’ pursuit of ABN. But Beijing and Singapore have indicated that Western banks’ risks are still too opaque, which could mean Barclays has to bring in other investors, possibly from the Middle East. — The Daily Telegraph

 

Source: Today Newspaper

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