Barclays Nears £650m Deal with Brookfield for UK Payments Business

Barclays is on the verge of finalizing a significant deal worth £650m to transfer control of its UK payments business to Brookfield Asset Management, a Canadian investment giant. After months of negotiations, the two companies are in the final stages of discussions that will initially see Brookfield acquire a 10% stake in Barclays’ merchant acquiring division. This deal is part of Barclays’ strategy to explore a sale or partnership for its merchant acquiring unit, which is one of the largest in the UK, as announced in February 2024.

The Phased Acquisition and Investment

The agreement outlines a phased acquisition process. Initially, Brookfield will acquire 10% of the merchant acquiring division. Three years after the deal completes, Brookfield will purchase an additional 80% stake, leaving Barclays with a 10% share in the business. Interestingly, Barclays has agreed to inject £400m into the payments division to fund investments aimed at returning the business to sustainable growth. Additionally, Barclays will provide approximately £250m of regulatory capital to secure the necessary approvals for the deal.

Timeline and Significance

While the deal could be announced as early as next week, insiders suggest that a public confirmation is more likely later this month. Estimates of the value of Barclays’ merchant acquiring arm have varied, ranging from less than $1bn to $2.5bn, reflecting the complexity and potential of the business. This transaction comes at a time when Barclays is in a strong position under the leadership of its CEO, CS Venkatakrishnan, with its shares having risen by over 75% in the past year, resulting in a market capitalization of over £44bn.

Strategic Implications

The deal highlights Barclays’ strategic approach to optimizing its portfolio and focusing on core business areas. By partnering with Brookfield, a renowned investment firm, Barclays aims to enhance the growth prospects of its UK payments business. This move also aligns with the broader trend of banks seeking partnerships or divestitures to streamline operations and allocate resources more effectively.

No Comment from Both Parties

Both Barclays and Brookfield have declined to comment on the ongoing discussions, maintaining confidentiality as they finalize the agreement. However, Barclays has previously stated that it is exploring various options, including partnerships, to enhance its merchant acquiring business. The bank has assured stakeholders that any further updates will be provided in due course.

Conclusion

The impending deal between Barclays and Brookfield marks a significant step in the evolution of Barclays’ UK payments business. With a structured approach to ownership transfer and substantial investments planned, the partnership is expected to drive growth and stability for the division. As the announcement draws near, stakeholders will be keenly watching the developments, given the strategic importance of this deal for both parties involved.