Barclays to sell $6bn stake in BlackRock

Bank exits US fund giant to bolster its reserves and improve return on capital

Barclays is to sell its entire $6.1bn (£3.8bn) stake in the US fund manager BlackRock, which it has held for almost three years since it sold Barclays Global Investors to the Americans.

Barclays said there would be a public offering of the shares in the market and a related buyback by BlackRock of up to $1bn of the stock. A prospectus was filed by BlackRock yesterday. The bank has held a 19.6 per cent stake in BlackRock since the $13.5bn sale of BGI to it in June 2009.

The sale comes at a time when global banks are raising extra capital to bolster their balance sheets against stricter regulatory requirements. Under regulatory rules, Barclays' profit on its stake in BlackRock did not count as part of its regulatory capital. By converting the stake into cash, it will boost its capital reserves considerably.

The next round of international banking rules, known as Basel III, will make it particularly unattractive for banks to own stakes in fund managers because they score badly among risk-weighted assets. In other words, regulators believes shareholdings in fund managers are far less solid than, say, holdings of UK gilts or US Treasury bonds.

The decision to sell the BlackRock stake also came as part of Barclays chief executive Bob Diamond's pledge to improve the bank's return on capital to 13 per cent. Last year this fell to 5.8 per cent – less than half the target – and Mr Diamond was forced to admit he would probably not hit his target by his original planned date of 2013.

It is understood that a review of Barclays' stake in BlackRock concluded that this was unlikely ever to produce the required 13 per cent return, and was in effect holding back improvements at the rest of the bank. If the stake could be sold, the cash raised could be put to more profitable use, the review concluded.

In September 2011, Barclays' investment in BlackRock was written down to a fair value of £3.4bn. Depending what price the shares on offer sell for – with pricing expected to be fixed in the next couple of days – Barclays will break even or emerge with a small profit.

Barclays Capital, Morgan Stanley and Bank of America Merrill Lynch are acting as joint bookrunners in the offering. Barclays said it would make a further statement when the tender offer has been priced. Shares in BlackRock were down 1 per cent at $169 in New York yesterday afternoon.

Mr Diamond picked up a £26m windfall when BGI was bought by BlackRock. He was awarded BGI options before joining its board in 2005 and bought additional shares in the fund management arm. Scores of other Barclays staff – who owned 4.5 per cent of the business – picked up a £340m share windfall from the deal.

BlackRock is one of the biggest asset managers in the world, with more than $3.65 trillion of funds under management. Ralph Schlosstein, the chief executive of Evercore Partners, a New York-based investment bank, said: "BlackRock today is one of, if not the, most influential financial institutions in the world."

BlackRock, founded in 1988, has clients in 60 countries, with offices in San Francisco, Chicago, Los Angeles, Dallas, Princeton, Wilmington, London, Zurich, Paris, Frankfurt, Sao Paulo, Tokyo, Hong Kong, Taipei, Beijing, Sydney and Dubai.

Barclays managed to avoid a UK taxpayer bailout during the 2008 financial crisis by turning to sovereign wealth funds in the Middle East for support.

Its shares rose 3.9p to 180p on the news yesterday.