Urgent meetings aim to break up Barings' business

BY JOHN WILLCOCK

NatWest Group's investment banking arm held an emergency board meeting last night to discuss buying Barings' fund management business, in a bidding contest which includes US giants Merrill Lynch and Morgan Stanley

The administrators of the stricken merchant bank are under intense pressure to sell all or part of Barings as quickly as possible, to avoid a mass exit of staff. Although they have expressed a preference to sell off Barings as a single unit, sources said they may be forced to sell the asset management side within the next few days "at a not very good price, as a stabilisation exercise."

Sources close to NatWest Markets said it was the leading British contender for the most easily sellable chunk of Barings, Baring Asset Management (BAM). "NatWest are running their ruler over the asset management side," said the source.

A spokesman for NatWest said last night: "We never comment on speculation."

Analysts put a price tag of around £300m on BAM, which has £30bn of funds under management.

A big stumbling block is the £2bn-plus of BAM's cash which is held on deposit with the bank. These funds could be caught up in the administration process, while selling BAM without them could worry clients of the fund management arm. Adminstrators, led by Ernst & Young's Nigel Hamilton, were working hard yesterday to establish the precise extent of the cash on deposit.

One merchant banker said yesterday: "If they want to sell the whole of Barings, it will have to be within a day or so. Otherwise fund management clients will go elsewhere, and corporate finance clients will get twitchy."

Barclays Bank and HSBC, owner of Midland Bank, are also in talks with the administrators to buy parts of the business. One observer of BZW, Barclays' investment arm, said: "BZW would love to buy the corporate finance operation. It would fit with BZW's aim to build a major European and Asian investment bank."

HSBC said it was keeping an eye on the situation. A spokeswoman said: "We don't have a shopping basket. It's only two years since we bought Midland, and we are still consolidating that."

Both Morgan Stanley and Merrill Lynch would dearly love a large European fund management arm, according to City sources.

Banking sources said yesterday that Merrill had sent senior executives Herb Allison and Mike Quinn to talk to Barings and the administrators. Merrill declined to comment.

Morgan Stanley last December launched a failed attempt to merge with Britain's SG Warburg. Morgan investment strategist Barton Biggs, speaking in Bangkok yesterday, said the investment bank would be interested in bidding for Barings "if the price is right".

ABN Amro, the giant Dutch bank which already owns City broker Hoare Govett, was interested in buying the whole of Barings during the failed rescue talks at the weekend, but has been put off as the huge, unlimited nature of Barings' losses has emerged.

Before the disastrous derivatives losses emerged, Barings, which is privately owned, was on the verge of announcing profits of over £100m and would have been worth around £800m, estimate analysts. A bid premium could have taken the price tag up to £1.1bn - £1.25bn. But now the business would face a huge discount because of the uncertainty, said the analysts.