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| Stakes well done |
| John Foley / Jun 04, 2009, 00:46 IST |
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The Abu Dhabi government-owned International Petroleum Investment Company (IPIC) sold its stake in Barclays Bank on June 2. The instruments were sold for £3.5 billion and are due to convert into Barclays shares by the end of June.
Barclays share price was down 15 per cent by 2pm on June 2. The shares were sold at 265p a share, according to Credit Suisse, which handled the sale. The placing was at a 16 per cent discount to the June 1 close of 316.25p.
Goldman Sachs began advanced talks with institutional investors on June 1 to sell up to 3.03 billion Hong Kong-listed shares in ICBC and raise $1.9 billion, the Financial Times reported.
Barclays: It's easy to feel schadenfreude when investors once dubbed "strategic" sell out for a juicy profit.
But while it may not sound like a vote of confidence that Goldman Sachs and an Abu Dhabi fund just dumped some $9 billion worth of stock in Industrial Commercial Bank of China and Barclays, the share sales suggest the market for bank shares is becoming almost normal.
Barclays parcelled out convertibles and warrants to a vassal of the Abu Dhabi royal family just six months ago. When the UK lender's investors cried foul, Barclays played up the strategic value of having the Gulf investors on side. Those assertions now ring somewhat hollow.
Both vendors' urge to raid the piggy bank is understandable. Goldman's ICBC investment is worth more than three times the $2.9 billion the Wall Street bank paid back in 2006. The bank agreed to retain most of its shares in March, since when ICBC's shares have risen 43 per cent. Selling a fifth of its holding for $1.9 billion means Goldman already recouped the bulk of its initial investment.
After Barclays shares rose almost 50 per cent over six months, it makes sense for IPIC to reinvest its £1.5 billion of gains into racier things. The UK bank's shares have done well as the risk of nationalisation receded, but while Barclays has a growth strategy it isn't a conventional growth stock.
The good news is that both blocks of shares looked to have been spread among large groups of investors – and both went for discounts smaller than one might have feared. Goldman dumped its stock just 4.6 per cent below the previous day's closing price. The Gulf investors faced a 15 per cent cut to the market price, but for a much more substantial 11 per cent stake.
It all suggests that a normal market for bank stocks is starting to assert itself, where large stakes can be sold to buyers other than opportunistic sovereign funds.
This will be most encouraging to those still waiting to offload big chunks of banks. Step forward the UK government, saddled with £23 billion of stock in Lloyds Banking Group and Royal Bank of Scotland. The government is apparently open minded about selling in blocks to strategic investors. But market placings may not be such a bad option after all.
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