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Barclays Sheds Private Equity Assets

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( Trefis) -- Barclays (BCS) is clearly in a hurry to ensure compliance with the stringent capital requirement rules expected to bring all financial firms in Europe under scrutiny.

That would explain its decision to shed private equity assets worth about $750 million. AXA Private Equity will soon take ownership of these assets, currently managed by Barclays Capital, the group's investment banking arm.

Barclays is the UK's second largest bank and competes with other worldwide banking institutions and financial services group like Citigroup (C), RBS Group (RBS), Bank of America (BAC), UBS (UBS) and JPMorgan Chase (JPM).

The Barclays Group is a major global financial services provider engaged in retail banking, credit cards, corporate and investment banking and wealth management with an extensive international presence in Europe, the Americas, Africa and Asia.

Our $18.15 price estimate for Barclays' stock represents a premium of about 10% to the market price.

Barclays' definitive agreement with AXA PE governs the sale of a portfolio of U.S. and European private equity interests held and managed by Barclays Capital. None of the assets to be sold are managed by Barclays Private Equity. The sale also includes some direct private equity interests held by Barclays Capital.

Barclays also added that the portfolio's book value is lower than the purchase price agreed upon.

The most direct impact of the deal is a profit equal to the difference between the book value and the sale price. This achieves two goals for Barclays at the same time: a reduction in the assets deployed by Barclays' capital, which are expected to become more expensive once the new regulations are in place and a small increase in the company's core tier one capital.

See our full analysis for Barclays here.

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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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