Barclays aims to reign in Spain

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The Independent Online

Barclays kick-started its plans for expansion on the Continent yesterday, saying it would buy Banco Zaragozano of Spain for €1.14bn (£803m).

Barclays kick-started its plans for expansion on the Continent yesterday, saying it would buy Banco Zaragozano of Spain for €1.14bn (£803m).

Britain's third biggest bank will merge its already fast-growing Spanish business with Zaragozano, creating the sixth largest private sector banking group in Spain.

Barclays is offering €12.7 a share for Zaragozano, 13 per cent more than Wednesday's closing price of the Spanish bank's shares. The price was well received in the City on the basis that the British bank has been able to drive a hard bargain with Zaragozano's owners due to the legal problems of its major shareholders.

Zaragozano's two largest shareholders and former co-chairmen are Spanish businessmen Alberto Alcocer and Alberto Cortina. The Albertos, who are cousins, stepped down in March after they were found guilty of fraud relating to Madrid properties. They own 40 per cent of the bank's shares – acquired as part of their separate divorce settlements – and control 50 per cent of its voting rights.

However, Barclays' shares fell 4 per cent on nerves that the deal would not be as successful as the bank hoped. Barclays, which believes it will see pre-tax savings of €100m from the deal, said it had backing for the bid from 54 per cent of Zaragozano's shareholders.

Most UK banks and insurers have made inroads into Spain, one of the fastest growing markets for financial services, but Barclays particularly has impressed the City with its record in the country. Last year it made pre-tax profits of €59.1m in Spain. Open Plan, Barclays' flexible mortgage offering, has been increasing its customer base. Last year, the bank took its share of net new mortgage lending in the Spanish market to 5 per cent, compared with 0.5 per cent in 2001.

Buying Zaragozano, based in Zaragoza in north-eastern Spain, will give Barclays a total of 526 branches and 570,000 customers in Spain. The combined group, which will be led by Barclays' Spanish chief executive, Jacobo Gonzalez-Robatto, will use both the Barclays and the Zaragozano brands.

The list of UK financial institutions which have eyed up foreign opportunities includes almost all major lenders, including Lloyds TSB. However, Lloyds has recently officially pulled back from that stance, saying the outlook on the Continent is not suitable for doing a deal of any substance.

The purchase of Zaragozano is Barclays chief executive Matt Barrett's second- biggest acquisition – after the £5.3bn acquisition of Woolwich in 2000 – since he joined in 1999.

Naguib Kheraj, head of Barclays Private Clients, said the acquisition of Zaragozano was "bite-sized". He said that once Barclays' Spanish management had bedded down this acquisition, "we will want to grow further in Spain."

The move has spurred speculation that Mr Barrett is now seriously on the acquisition path, in the UK as well as abroad.