Barclays Natural Resources Investment will be bought out by its own management. The Financial Times is reporting that after being unable to find a suitable buyer, management has decided to lead a buyout of its BNRI private equity unit that focuses on energy and commodities.
The deal is expected to be finalized by mid-July, but still leaves parent Barclays looking to sell the close to $1 billion in investments in the PE arm’s portfolio.
Details on Barclays failed sale of BNRI
According to knowledgeable sources, BNRI will be acquired by its current managers, led by CEO Mark Brown. It will be spun off by the end of the year, and plans to raise a new fund from third-party investors.
The 14-employee private equity unit was lumped in with Barclays’ non-core assets in the restructuring of its investment bank announced a year ago, which specified that the bank would give up the trading of commodities.
Analysts point out that Barclays asset sale is related to new regulations such as the U.S. Volcker rule that make it more expensive for banks to invest in internal PE arms.
The bank had originally planned had hoped to sell BNRI’s portfolio and its management team as a unit, but it couldn’t come to terms with several potential buyers despite lengthy negotiations.
The sources also note the management buyout deal will lead to BNRI changing its name to Global Natural Resource Investment and moving its headquarters. However, the spun off firm will continue to manage its portfolio on behalf of the bank.
That said, the new firm will also have to raise a new fund from third-party investors. Keep in mind that an earlier fundraising effort was postponed in 2012, but external investors have invested $1 billion together with Barclays in prior deals.
Of note, Barclays has already spun off, sold or shut down a number of other PE projects, including Barclays Private Equity (which was renamed Equistone following a sale to management) and the sale of its infrastructure unit to 3i.
The restructuring of Barclays’ investment bank aims at cutting back its risk-weighted assets by £90 billion, as well as shedding 7,000 jobs in an effort to boost profitability.