By Ben Livesey and Malcolm Scott
June 2 (Bloomberg) -- Barclays Plc’s Abu Dhabi investors plan to sell 4.12 billion pounds ($6.8 billion) of shares in the bank, shedding a stake they bought last year as the U.K.’s third-biggest lender sought to avoid a government bailout.
PCP Gulf Invest 1 Ltd., owned by the Abu Dhabi-based International Petroleum Investment Co., hired Credit Suisse Group AG to sell mandatory convertible notes, it said in an e- mailed statement. The shares are likely to be priced at about 265 pence each, 16 percent less than yesterday’s closing price, according to people close to the situation.
Abu Dhabi became one of the bank’s biggest investors in October, when Barclays Chief Executive Officer John Varley tapped sovereign wealth funds in the Mideast as he tried to avoid giving a stake to the government. Barclays has gained 54 percent since then as the bank reported a 2008 profit, shunned the U.K.’s asset insurance program and agreed to sell assets.
“The guy has made a lot of money from the rise in the share price and is now cashing in,” said Simon Maughan at MF Global Securities Ltd, who has a “buy” rating on Barclays. “If you are selling about 12 percent of the capital base then you are going to have to take a discount on that and you would expect the share price to reflect that.”
Barclays fell 14 percent to 272 pence as of 11:32 a.m. in London trading, after dropping as low as 264.75 pence.
The notes IPIC is selling amount to 1.3 billion shares, Barclays said in a separate statement. The fund continues to hold warrants for 758.4 million Barclays shares that can be exercised at 197.775 pence a share.
Bypassing Shareholders
London-based Barclays bypassed existing shareholders last year when it raised money to comply with new capital requirements. It agreed Oct. 31 to sell 2.8 billion pounds of convertible stock and 3 billion pounds of preferred stock to Sheikh Mansour Bin Zayed Al Nahyan, a member of the Royal Family of Abu Dhabi, Qatar Holding LLC and Challenger Universal Ltd., an investment vehicle set up by Qatar.
Varley, 53, said at the time that the investment would help Barclays create a “strong alignment with regions which have growing economic power.”
“It’s a bit embarrassing as they were meant to be strategic anchor investors,” Leigh Goodwin, an analyst at Fox- Pitt Kelton Ltd. in London, said of today’s sale. Goodwin has an “outperform” rating on the stock. “Nothing fundamentally has changed, and it is a buying opportunity,” he added.
Shares Surge
Barclays shares have surged six-fold since dropping to a low of 51.2 pence on Jan. 23 as concern ebbed that the bank would need to raise more money. The five-member FTSE 350 Banks Index gained 53 percent in the same period.
“There is little chance of Barclays continuing their rally,” said Danny Clarke, a Liverpool-based analyst at Shore Capital Group Plc, who has a “hold” rating on Barclays. “The shares were trading toward the top end of any analysis in terms of what they were going to be making in profit in the medium term.”
The KBW Bank Index of 24 U.S. financial stocks has doubled since dropping to a March 6 low on signs of a possible recovery in the U.S. economy. JPMorgan Chase & Co. and American Express Co. are among the financial institutions taking advantage of the rally to sell shares and raise funds to pay back money received from the government’s Troubled Asset Relief Program.
Australia & New Zealand Banking Group Ltd. last week sold A$2.5 billion ($2 billion) of stock to fund a bid for Royal Bank of Scotland Group Plc’s Asian assets. Sumitomo Mitsui Financial Group Inc. may sell as much as 834 billion yen ($8.7 billion), Japan’s second-biggest bank said May 28.
‘Reshuffling’
IPIC said it was selling the Barclays stake as it focuses on its long-term strategy of investing in energy assets. That mirrors a shift away from financial stocks among sovereign wealth funds, including Temasek Holdings Pte, as commodity prices recover from last year’s rout.
Commodities prices are showing signs of a rebound, less than a year after the Reuters/Jefferies CRB Index of 19 raw materials began its plunge from a July 3 record, dropping as much as 58 percent by Feb. 24 as the global economy entered its first recession since the Great Depression. The index jumped 14 percent in May, the most since July 1974.
“They’re reshuffling a bit, putting money into areas where, if indeed this is the beginning of the end of the great recession, there could be a recovery in demand for resources,” said Song Seng Wun, an economist at CIMB-GK Securities Pte in Singapore.
‘Good Money’
Temasek, Singapore’s state-owned investment company, yesterday agreed to buy a stake in Olam International Ltd., its first foray into commodities since naming former head of BHP Billiton Ltd. Charles “Chip” Goodyear as chief executive officer-designate in February.
China Investment Corp. and Qatar Investment Authority said in March they would buy commodity assets after values dropped.
PCP Gulf Invest 2, another IPIC subsidiary, is considering selling its 14 percent step-up callable reserve capital instruments in Barclays, IPIC said.
“They have made good money on the holding in a short period of time so you can’t blame them for taking the profit,” said Simon Willis, an analyst at NCB Stockbrokers Ltd. in London who has a “reduce” rating on the stock.
To contact the reporters on this story: Malcolm Scott in Sydney at mscott23@bloomberg.netBen Livesey in London at blivesey@bloomberg.net
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