Barclays Explores Merger with Standard Chartered to Thwart Activist Investor

Barclays Plc is reportedly exploring a potential merger with rivals, including Standard Chartered. No formal or information bid was made, the Financial Times reported on Wednesday, citing two unnamed sources.

The Barclays – Standard Chartered merger could be a part of wide-ranging contingency plans being considered by senior board members to thwart possible demands from an activist investor who has become one of its biggest shareholders. The activist investor is Edward Bramson, whose investment vehicle Sherborn Investors recently bought 5.4 percent stake in Barclays.

Earlier in May, Bramson met disgraceful Barclays CEO Jes Staley in New York. Bramson reportedly told Staley he was still working on his list of strategic proposals for Barclays. The Financial Times reported that one of them would be to demand the return of $33.5 billion (25 billion pounds) to shareholders that is currently held up in the bank’s long-underperforming corporate and investment banking business.

A LOW PROFILE ACTIVIST INVESTOR

Edward Bramson is not just any shareholder. He has bought stakes in a series of British companies in the past 15 years and yield returns averaging 22.8% a year. He does so by buying a huge chunk of the stake, demanding a seat on the board, and then strong-arming for cost cuts, payouts to shareholders and other changes to increase returns.

Barclays was always a natural choice on Bramson’s list of targets. The bank’s shares are among the worst performers in the sector. The British multinational investment bank made a net loss of almost 2 billion euros last year. Moreover, the chief executive Jes Staley is currently under investigation for trying to unmask a whistleblower.

Unlike other US activists such as Bill Ackman or Carl Icahn, Bramson does not use the media to conduct a campaign against the company’s management.

BARCLAYS – STANDARD CHARTERED DEAL

According to the sources cited by the Financial Times, the Barclays possible merger was supported by both Barclays chairman John McFarlane and Gerry Grimstone, chair of the bank’s international unit.

McFarlane, a former Standard Chartered employee, had “a real affinity” for his former workplace. It would be surprising if the deal came through, even though it would be the logical thing to happen.

The Barclays merger could face regulatory hurdles since both the banks are a big part of the global banking system.

Currently, Barclays Plc is approaching the end of a multi-year revamp. This includes the sale of billions of pounds of assets and the settlement of all of its misconduct charges.

Anna Domanska
Anna Domanska is an Industry Leaders Magazine author possessing wide-range of knowledge for Business News. She is an avid reader and writer of Business and CEO Magazines and a rigorous follower of Business Leaders.

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