Barclays Activist Sherborne Puts Cap on Potential Stock Gains, Losses with Loan
28 Febbraio 2019 - 3:30PM
Dow Jones News
By Margot Patrick
LONDON-- Sherborne Investors, the activist firm seeking a
strategic U-turn at Barclays PLC, is financing around half of its
5.5% stake in the British bank with a $1.38 billion loan.
Sherborne, in a Feb. 8 filing, said it bought shares with the
loan and purchased put and call options from the lender to cap its
exposure. These protect against losses if shares fall below a
particular level and limit potential gains. The options expire
between October and March 2021. People familiar with the matter
said Bank of America is the lender and counterparty on the options.
The securities filing and the Bank of America loan were first
reported by the Financial Times.
Sherborne, headed by activist investor Edward Bramson, wants
Barclays to reduce the size of its investment bank to focus on
consumer banking and has asked Barclays' shareholders to appoint
Mr. Bramson to the bank's board at a meeting in May. Last week,
Barclays' board recommended a vote against Mr. Bramson's
appointment, saying it remains confident in the lender's current
strategy combining investment banking, credit cards and U.K. retail
banking.
In the U.S. securities filing, which was made because
Sherborne's stake in the bank has risen above 5%, Sherborne said it
bought Barclays shares because it believes they are undervalued. It
said it would continue to discuss Barclays' performance, capital
structure, financial condition and strategic direction with the
bank's board and management, and could make further proposals to
the board's composition beyond the effort to elect Mr. Bramson.
Sherborne in March 2018 first disclosed it held a 5.2% stake in
Barclays through shares and derivatives. Sherborne's Mr. Bramson
and Stephen Welker met last year with Barclays officials, including
Chief Executive Jes Staley and Chairman John McFarlane, to discuss
potential changes at the bank, but they haven't been able to find
common ground in their visions for the bank.
Mr. Staley and his management team, with the board's support,
want to improve returns at Barclays investment bank by expanding in
some areas, and considers it core to its strategy to have diverse
operations. Mr. Bramson in a December letter told investors in a
Sherborne fund that he believes the unit will keep dragging down
the bank's valuation without an overhaul.
Last week, Barclays countered Mr. Bramson's view by reporting a
better than expected performance by the unit in the fourth quarter.
Barclays and Sherborne are scheduled to meet again on March 12, Mr.
Staley said, while announcing last week's results. He said he
doesn't see the need for Mr. Bramson to join the board to share his
views.
Sherborne's loan from Bank of America is part of a financing
structure known as a funded equity collar. The structure involves a
bank making a loan to an investor to buy shares, with the shares as
collateral, and entering put and call options on the stock to cap
the investor's upside and downside.
In its filing, Sherborne said it purchased 943,949,089 shares in
Barclays for around $2.54 billion in all, with a bit less than half
paid for in cash from its funds and the rest through derivative
transactions.
Sherborne is aiming to make at least double its investment in
the bank by bringing about changes, according to people familiar
with the matter.
Write to Margot Patrick at margot.patrick@wsj.com
(END) Dow Jones Newswires
February 28, 2019 09:15 ET (14:15 GMT)
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