Could Barclays’ iShares division really fetch £5bn?

Following confirmation that several “parties” are interested in iShares , analysts have been crunching the numbers to come up with a value for the business.

The spin in the weekend press, was that iShares, one of the world’s leading ETF (exchange-traded funds) mangers, could be worth between £3bn-£5bn. To put that figure in context, the current market value of Barclays is £7bn.

With $325bn of assets under management at the turn of the year, Alex Potter of Collins Stewart said iShares would probably fetch a lot less than £3bn.
This is a lower revenue margin business than BGI s active assets but also a lower cost business meaning it could easily be one-quarter (or more) of BGI s profits, or 3-5% of Barclays group. There are few good comparator deals done recently. Aberdeen-CSAM was at 0.6% of AuMs, implying £1.4bn but this is a very different business. If we assume the business accounts for around 25% of BGI (probably conservative), then it made c.£110m net profit in 2008. A mid-teens earning multiple would push the purchase price a little higher. This would be 10-12p per share at group level meaning you are losing <5% of profits at a value of >10% of current price.

Another analyst, who did not want to be named, agreed. He reckoned the iShares was worth 0.5 per cent of assets under management, or £1.2bn.

http://ftalphaville.ft.com/blog/2009/03/16/53618/valuing-ishares/

So, who´s going to be the buyer ?

 

Jaime Dimon. He'll buy anything.......and pay 2% of AUM.

 

Thanks for this thread and article. I had some questions about the survivability of ishares, but that doesn't seem to be an issue since it could be sold off to a more financially stable company.

Ishares and ETFs are a huge part of alot of people's investing strategy.