CVC Capital Partners, the private equity group, is to buy iShares, the ETF provider, for around GBP3 billion.
iShares released a statement on Wednesday stating that CVC Capital Partners would be the preferred buyer. Sources close to the deal said the bid is all but complete, and would come to GBP3 billion.
Barclays need to sell iShares lessened somewhat after the FSA announcement that the bank had passed an extreme stress test on whether it needed to seek taxpayer help by joining the UK government insurance scheme.
The final price will be below the initial GBP5 billion asked by Barclays. This is because CVC will not be buying the iShares securities lending business. The GBP2 billion drop in price highlights the value placed by Barclays on securities lending.
It is also not clear what CVC aims to do with the ETF business. It is highly likely that there will be job cuts at iShares, as the company performs many community roles within the ETF industry. While this has a positive effect on the burgeoning ETF industry, it is hard to quantify the revenue it brings into iShares. It would not be surprising to see a private equity buyer cut down on aspects of iShares that does not bring in direct revenue.
One option for CVC would split up iShares and offer the various arms to regional bidders. iShares is unusual by being a global ETF provider. Often US and European ETF providers are averse to becoming trans-Atlantic providers. One option for CVC would be to split the regional arms of iShares into separate companies, and sell them on.
CVC has also made a new hire. Kamil Salame has been made Partner of CVC and US Head of Financial Institutions Group (FIG) with immediate effect.
CVC’s Global FIG initiative is comprised of teams based in USA, Europe and Asia, and is headed by Jonathan Feuer, a Managing Partner of CVC and Global Head of FIG.
Jonathan Feuer commented, Kamil is an important addition to our team at a time when investment opportunities in the financial sector have never been greater. Kamils depth of experience in financial services and Private Equity will be incredibly valuable to CVC and our Financial Institutions team.
Salame joins CVC from DLJ Merchant Banking Partners where he served as a Partner and Member of the Management Committee and as a Managing Director of Credit Suisse. Salame was a member of DLJMBs Investment Committee and, as such, was involved in all aspects of managing DLJMBs portfolio, which is comprised of more than forty companies and represents approximately USD12 billion of assets under management. At DLJMB, Kamil led the groups investment activities in financial services and media. During his tenure with the firm he completed approximately thirty private equity transactions in a broad range of industries including financial services, real estate, media, industrial, and consumer.
Prior to joining DLJMB, Salame worked in DLJs Leveraged Finance Group and DLJ Real Estate Capital Partners. He received a B.S. from Georgetown University, an M.B.A. from Columbia Business School, where he was an Editor and Fellow of the Columbia Journal of World Business, and a J.D. from Columbia University School of Law where he was a Harlan Fiske Stone Scholar. He is admitted to practice law in New York, Connecticut and Washington, D.C.