Attack on Barclays’ Arab fund-raiser stepped up

Pirc, which enjoys a reputation as the leader of the awkward squad among institutional investors, today followed the more conservative lobby group the Association of British Insurers by raising significant questions about the fund-raising bankrolled by the Qatar Investment Authority and the Abu Dhabi royal and Manchester City owner Sheikh Mansour.

Barclays wants to raise cash through its new-found allies in the Persian Gulf, albeit on generous terms, rather than take money from the Treasury's banking industry bailout and be in hock to the Labour Government.

However, Pirc says delivering a generous slice of the bank to Arab investors is wrong, and existing shareholders should stand up for their rights.
"Shareholders have come in for criticism during the current crisis for failing to exercise their ownership responsibilities effectively," said Alan MacDougall, managing director of Pirc, which advises many local authority pension funds.

"As such, it is important institutional investors demonstrate that they do take this role seriously. Pirc believes simply assenting to a deal which many shareholders have problems with would not be the responsible thing to do in this instance.

"At least a part of the company's investor base should send a clear unequivocal message that they do not think this is a good solution to the bank's current situation and that it has come at a heavy price for existing shareholders."

The Barclays deal envisages delivering a 32% stake in the bank to the Arab investors at a knockdown price that would see existing shareholders' earnings diluted by 30%. Barclays investors vote next Monday at a shareholder meeting in Docklands that looks likely to be a stormy affair.

Pirc's intervention follows a meeting of Barclays high command, led by Marcus Agius, with leading institutions organised by the ABI. Some investors, led by 5% shareholder Legal & General, are said to have demanded a less-generous rewriting of the agreement or for pressure to be put on the Government to give Barclays better terms than those on offer to the likes of Royal Bank of Scotland, Lloyds TSB and HBOS.

Barclays refused to comment on Pirc's view. However, analysts doubt whether the dissenters will be in the majority at the shareholder meeting.