CVC To Buy iShares … Or Maybe Not

Journal of Indexes Staff
June 22, 2009


CVC To Buy iShares… Or Maybe Not

Luxembourg-based CVC Capital Partners agreed to buy Barclays Global Investors’ iShares exchange-traded fund unit for $4.4 billion in April. The deal did not include iShares’ share-lending business, an extremely lucrative segment of the iShares operation.

Under the terms of the CVC deal, Barclays was to provide the bulk of the financing, providing loans on reasonably favorable terms for $3.1 billion of the $4.4 billion deal.

CVC Capital is a private equity firm with diversified interests; the iShares purchase was to be its first foray into the financial sector.

But no sooner had the ink dried on the deal documents than rumors of alternate bidders emerged. As part of the deal, Barclays had a 45-day window to look for alternative and superior offers. If it found one, it would have to pay a $175 million breakup fee to CVC Capital.

As this issue of the Journal of Indexes goes to press, reports are circulating that firms such as Black Rock Capital may be in the running. Black Rock is said to be entertaining a $10 billion bid that would encompass not just iShares, but the broader BGI business. Also mentioned as potential bidders are private equity firms Apax Partners, Hellman & Friedman and BC Partners.

Management at Barclays owns up to 10 percent of iShares, and will be paid a cash dividend based on its stakes in the deal. Barclays CEO Robert Diamond Jr. is expected to earn upward of $6.9 million from the deal; he did not participate in the consideration of the iShares transaction.