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Barclays (BCS) is Now Looking for Buyout Firms for U.K. Unit Sale
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Barclays PLC (BCS - Free Report) , which has been considering selling a stake in its U.K. merchants’ payment processing unit for a while, is now targeting buyout firms to buy a majority stake in the business. The news was reported by Reuters, citing people with knowledge of the matter.
In September 2023, it was reported that BCS was looking for a partner to boost the business.
Initially, the British bank had conversations with specialist payments providers regarding a deal. However, the conversations did not make any progress in the final weeks of 2023 because peers indicated that they were not in a position to make an offer.
Thus, BCS is now offering to sell almost 80% of the business, retaining its 20% stake, two people familiar with the matter said.
A Barclays spokesperson stated, “Providing leading products, coupled with the best service, is key to us being the bank of choice for our corporate clients’ payments services. We are exploring partnerships for our merchant acquiring business where the power of that relationship brings complementary expertise to the benefit of our clients.”
Barclays wants to bring in a partner with the strategic “know-how” to expand the business and raise capital.
In September, one person with knowledge of the matter said that based on estimated earnings before interest, tax, depreciation and amortization of £300 million and similar deals, the U.K. payments business could be worth at least £2 billion.
The discussions over the U.K. payments unit are part of a review of Barclays’ global payment activities across merchant acquiring and credit card services.
Notably, Barclay’s decision to divest a stake in the payment processing unit came as the bank explored options to best allocate capital among its divisions and boost the share price.
The bank has been striving to simplify operations and focus on core businesses over the past few years. With this aim, it has restructured its business into two divisions, and divested several non-strategic and less profitable operations globally.
BCS completed the ring-fencing of its investment banking operations in April 2018, while reintegrating its non-core division into the company’s core operations in July 2017. Driven by these initiatives, Barclays’ profitability is expected to improve over time.
In the past three months, shares of BCS have gained 12.8% compared with the industry’s 8.2% growth.
Last month, HSBC Holdings (HSBC - Free Report) completed the divestiture of its France-based retail banking business. The company sold the business to Crédit Commercial de France (“CCF”), a subsidiary of My Money Group, after receiving all the necessary regulatory approvals.
Noel Quinn, HSBC CEO, said, “This represents an important milestone in our strategic vision for Europe. I am delighted with this positive start to 2024 - our team in Europe will continue with the aim of becoming the leading international wholesale bank in Europe, complemented by a targeted Wealth and Private Banking business.”
HSBC initially announced the transaction in June 2021 after conducting a review of the retail unit and finding it to be unprofitable. However, in April 2023, the company said that the deal closure had become less certain owing to the unexpected rise in interest rates in France, which “significantly increased” the capital requirements for the buyers at closing.
Following this, in June 2023, HSBC tweaked the terms of the deal. Per the revised agreement, the company will retain a €7 billion ($7.6 billion) portfolio of home loans that it had originally expected to sell to My Money Bank, while CCF will inject €225 million of additional capital into the business. At the end of 2022, the France-based business had a total loan book of €23.4 billion.
Likewise, Ally Financial Inc. (ALLY - Free Report) has announced a definitive agreement to sell Ally Lending (its point-of-sale or POS financing business), including $2.2 billion of loan receivables, to Synchrony. The move reflects Ally Financial's commitment to optimizing its capital allocation and prioritizing resources toward high-growth areas.
The portfolio being acquired by SYF is a strategic fit, reinforcing its position in the industry by offering both revolving credit and installment loans at the point of sale in the home improvement vertical.
For Ally Financial, this transaction is part of a broader initiative to invest resources in growing scale businesses and strengthen relationships with dealer customers and consumers.
ALLY expects the divestiture to bolster its Common Equity Tier 1 ratio by almost 15 basis points at closing. The deal is also anticipated to be modestly accretive to tangible book value and earnings per share in 2024.
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Barclays (BCS) is Now Looking for Buyout Firms for U.K. Unit Sale
Barclays PLC (BCS - Free Report) , which has been considering selling a stake in its U.K. merchants’ payment processing unit for a while, is now targeting buyout firms to buy a majority stake in the business. The news was reported by Reuters, citing people with knowledge of the matter.
In September 2023, it was reported that BCS was looking for a partner to boost the business.
Initially, the British bank had conversations with specialist payments providers regarding a deal. However, the conversations did not make any progress in the final weeks of 2023 because peers indicated that they were not in a position to make an offer.
Thus, BCS is now offering to sell almost 80% of the business, retaining its 20% stake, two people familiar with the matter said.
A Barclays spokesperson stated, “Providing leading products, coupled with the best service, is key to us being the bank of choice for our corporate clients’ payments services. We are exploring partnerships for our merchant acquiring business where the power of that relationship brings complementary expertise to the benefit of our clients.”
Barclays wants to bring in a partner with the strategic “know-how” to expand the business and raise capital.
In September, one person with knowledge of the matter said that based on estimated earnings before interest, tax, depreciation and amortization of £300 million and similar deals, the U.K. payments business could be worth at least £2 billion.
The discussions over the U.K. payments unit are part of a review of Barclays’ global payment activities across merchant acquiring and credit card services.
Notably, Barclay’s decision to divest a stake in the payment processing unit came as the bank explored options to best allocate capital among its divisions and boost the share price.
The bank has been striving to simplify operations and focus on core businesses over the past few years. With this aim, it has restructured its business into two divisions, and divested several non-strategic and less profitable operations globally.
BCS completed the ring-fencing of its investment banking operations in April 2018, while reintegrating its non-core division into the company’s core operations in July 2017. Driven by these initiatives, Barclays’ profitability is expected to improve over time.
In the past three months, shares of BCS have gained 12.8% compared with the industry’s 8.2% growth.
Image Source: Zacks Investment Research
Currently, BCS carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Divestitures by Other Finance Firms
Last month, HSBC Holdings (HSBC - Free Report) completed the divestiture of its France-based retail banking business. The company sold the business to Crédit Commercial de France (“CCF”), a subsidiary of My Money Group, after receiving all the necessary regulatory approvals.
Noel Quinn, HSBC CEO, said, “This represents an important milestone in our strategic vision for Europe. I am delighted with this positive start to 2024 - our team in Europe will continue with the aim of becoming the leading international wholesale bank in Europe, complemented by a targeted Wealth and Private Banking business.”
HSBC initially announced the transaction in June 2021 after conducting a review of the retail unit and finding it to be unprofitable. However, in April 2023, the company said that the deal closure had become less certain owing to the unexpected rise in interest rates in France, which “significantly increased” the capital requirements for the buyers at closing.
Following this, in June 2023, HSBC tweaked the terms of the deal. Per the revised agreement, the company will retain a €7 billion ($7.6 billion) portfolio of home loans that it had originally expected to sell to My Money Bank, while CCF will inject €225 million of additional capital into the business. At the end of 2022, the France-based business had a total loan book of €23.4 billion.
Likewise, Ally Financial Inc. (ALLY - Free Report) has announced a definitive agreement to sell Ally Lending (its point-of-sale or POS financing business), including $2.2 billion of loan receivables, to Synchrony. The move reflects Ally Financial's commitment to optimizing its capital allocation and prioritizing resources toward high-growth areas.
The portfolio being acquired by SYF is a strategic fit, reinforcing its position in the industry by offering both revolving credit and installment loans at the point of sale in the home improvement vertical.
For Ally Financial, this transaction is part of a broader initiative to invest resources in growing scale businesses and strengthen relationships with dealer customers and consumers.
ALLY expects the divestiture to bolster its Common Equity Tier 1 ratio by almost 15 basis points at closing. The deal is also anticipated to be modestly accretive to tangible book value and earnings per share in 2024.