Less than two years ago, the mere rumor of iShares being up for sale would have been enough to engage dozens of companies into a bidding war over the world’s largest ETFs provider.
Not only are ETFs the fastest growing segment of the asset management business, iShares (a subsidiary of Britain’s Barclays Bank PLC) has represented the cr?me’ de la cr?me’ of ETF investing. But today, even good businesses on the selling block are attracting scant interest.
Like other global banks, Barclays Bank (the parent company of Barclays Global Investors) has been feeling the economic pinch and took mammoth losses on mortgage-related investments. The thinly capitalized financial giant found itself caught between a rock and a hard place. To raise money, it moved to sell profitable parts of its business, rather than sell shares to the British government.
Under the deal, which is valued at $4.4 billion, Barclays PLC agreed to sell the iShares ETF unit to CVC Capital Partners, the most serious bidder. According to Credit Suisse, CVC is paying 15 times iShares’ annual earnings for one of the bank’s most profitable business segments.
CVC Capital Partners is a European private-equity firm which manages roughly $21 billion in investment capital on behalf of 250-plus investors from North America, Europe, Asia and the Middle East. Among them are many leading pension funds, financial institutions and funds of funds.
CVC funds own 52 companies worldwide with combined sales of about $100 billion, employing some 450,000 people. The portfolio of companies includes the Belgium postal services, Formula One, Tower Records and more.