Barclays PLC BCS, which is simplifying businesses to primarily focus on core banking operations, is in advance talks to sell its natural resources-focused private equity business – Barclays Natural Resource Investments (“BNRI”) – to the unit’s management. This was first reported by Sky News.
With commitments over $3 billion to 28 companies, BNRI will be bought by its top executives, led by Mark Brown, in the coming months. It will seek to raise new funds from third-party investors. The unit has offices in London, New York and Doha.
Following its management buyout, BNRI will be known as Global Natural Resource Investment. The division, with nearly 16 staff members, will continue to manage 17 investment portfolios on behalf of Barclays.
BNRI was put on the block as Barclays found the business strategically less important. Last year, the company had formed Barclays Non-Core segment with an aim to dispose operations that were unprofitable/non-core. BNRI is part of the segment that also includes physical commodities unit.
Barclays had intended to sell off BNRI to outside parties. However, failure to find a suitable buyer incited the company for management buyout. Also, expected implementation of the Volcker Rule in the U.S. later this year is one of the reasons behind the hastened sell-off. The Volcker Rule prohibits banks to own and invest in captive private equity operations.
We believe Barclays’ goals to focus on core operations and improve efficiency will boost its profitability in the long run. Hence, the management buyout of BNRI marks a step in the right direction.
Currently, Barclays holds a Zacks Rank #2 (Buy).
Notably, Barclays is not alone in selling its private equity unit. Many global banks including JPMorgan Chase & Co. JPM, Credit Suisse Group AG CS and Bank of America Corporation BAC have sold their private equity divisions over the past few years.
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