Part of what has caused rumored ongoing discussion (e.g. “water cooler” talk) at Barclays Global Investors and its iShares division is that the shake out on who stays and who likely goes depends on who acquires – if anyone – the unit(s). As pointed out in earlier posts here , here , and here , this deal has had more ups and downs that your Great America roller coaster ride. The cost – if you could factor it – has been high in terms of employee productivity, as people have been watching the deal making, not doing “real” work. [Disclosure: I previously worked at BGI.]
BlackRock, one of the names in the forefront of conversation , is a major force in the Fixed Income arena. While I think it’s an open debate as to whether this New York City firm would keep much, of anyone, at San Francisco-based BGI, it’s pretty clear in any case that its unlikely to be folks at BGI’s much smaller Fixed Income shop. The other acquirers floated in the media– such as Bank of New York – Mellon, CVC Partners, or any other named parties have different twists on how the acquisition would impact people in terms of job loss. Any acquirer will need to figure out how to rationalize costs to pay for the acquisition. [Update : See the June 8, New York Times piece here .]
While the “go shop” period for parent firm Barclays PLC ends on June 18th, the “winner(s)” – if any – may not be announced until later as Barclays may need to take time to sort out the merits of any late date bids. [Update 2: It appears from this news report from the San Francisco Business Times that June 18th may be the latest date, and that Barclays can choose a bidder prior to that June 18 date.]
The second obvious question – like the fog hanging off the Golden Gate in San Francisco – is whether a deal will be done for either units or at all. With a break-up fee of $175 million , CVC Partners walks away with cash should they not be chosen. While that sounds like a large nut (and it is a lot of money), it’s small change for Barclays given the reported profitability of BGI over most – but not all – of the last 5 years.
Barclays entered into the sale of iShares – and later its parent unit BGI – to raise capital to meet requirements set by the United Kingdom regulatory folks. Unlike its UK banking peers, who have been forced to borrow from the government to meet those requirements – and required to go through some “under the blankets” scrutiny, Barclays has assiduously avoided further government involvement and examination of its internal financial workings.
Bank stock prices, including Barclays, have generally risen over the last few months – and in Barclays case so much so that a “long term” investor" who had purchased 2.8 UK pounds of convertible stock recently sold 1.3 billion Barclays shares for a quick $1.46 billion profit for their seven months of investment. The inventor continues to hold warrants for 758.4 million Barclays shares that can be exercised at 197.775 pence a share.
Provided stock prices continue to perform, it would seem well within the realm of easy possibility that Barclays would keep iShares, BGI ex-iShares – or both.
Meanwhile employees at BGI continue to wait – and wonder.
To be continued.