Barclays goes East to finance ABN bid

by Gill Montia

Story link: Barclays goes East to finance ABN bid

Barclays is reported to be negotiating agreements with the governments of China and Singapore, aimed at raising approximately £10 billion to help finance its takeover of ABN Amro, the Dutch bank.

If the talks are successful, the money raised could allow Barclays to increase its takeover bid for ABN to around £50 billion.

According to sources in the banking sector, the agreement under discussion would give the Government of China around 7% of the enlarged group.

At the same time, Temasek, which is owned by the Government of Singapore, would hold around 3%.

However, if Barclays fails to acquire ABN, China’s newly formed investment authority and Temasek would still take shares in Barclays, albeit on a smaller scale.

China has recently indicated changes in its foreign investment policy and is believed to be interested in buying significant stakes in overseas companies.

The country has $1.2 trillion of foreign exchange reserves, much of which has been placed in US Treasury or Government bonds.

Acquiring a 7% interest in the entity created by the merger of Barclays and ABN is likely to raise some concerns in Western financial institutions and most particularly amongst Barclays’ shareholders.

Blackstone, the US private equity firm that recently sold a £1.5 billion stake in itself to the Chinese government, is reported to be central in brokering the deal.