CVC Capital to buy iShares for $4.4bn

CVC Capital Partners has agreed to purchase the derivatives investment business of Barclays subsidiary iShares, in a deal reportedly worth $4.4bn.

The investor beat off rival bids from private equity groups such as Apax Partners, Bain Capital, Colony Capital and Hellman & Friedman to secure the transaction.

The deal, which equates to 15x iShares's annual earnings, will be financed in part by Barclays, which is thought to be providing a debt package of $3.1bn. The bank will also gain warrants representing a fifth of future increases in the value of the business - an option the bank values at $520m.

The deal is evidence of Barclays need for cash to avoid seeking state aid, as many big name banks have already done. According to reports, the bank will immediately record a $2.2bn gain.

iShares deals in exchange-traded funds which are tradable like stocks, giving investors easy and inexpensive access to a wide range of investments, such as oil and stock indexes. iShares' securities business will not be included in the deal.

As part of the transaction, Barclays has until June to seek a higher offer, but it will have to pay CVC a break-up fee of $175m if it decides to sell the business to anyone else.

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