UPDATE 4-Abu Dhabi makes $2.5 bln from Barclays stake sale

Tue Jun 2, 2009 12:44pm BST

Quotes

   

* IPIC set to reap 1.5 bln pound profit in seven months

* Fears raised of further sovereign wealth fund sales

* Shares sold at 265p each - bookrunner

* Sold at 16 pct discount to Monday's close

* Barclays shares down 15 pct, other banks fall

(Adds confirmation of placing price, details)

By Dominic Lau and Steve Slater

LONDON, June 2 (Reuters) - Abu Dhabi sold more than 11 percent of Barclays (BARC.L), making $2.5 billion from an investment that helped the British bank through the financial crisis and raising fears more may cash in on a recent rally in bank shares.

The Abu Dhabi government-owned International Petroleum Investment Company (IPIC) on Tuesday sold about 3.5 billion pounds worth of instruments that are due to convert into Barclays shares by the end of June.

The shares were sold at 265 pence a share, said Credit Suisse (CSGN.VX), which handled the sale. The placing was at a 16 percent discount from Monday's close of 316.25p.

Shares in Barclays fell 13 percent to 274.5p by 1120 GMT, the biggest FTSE 100 .FTSE faller. Other bank shares fell as the sale soaked up demand for stock.

The sale also stoked fears that other big Barclays investors may also look to take profits, and that other sovereign wealth funds might be looking to exit the investments they have made. Barclays raised funds from Qatar, China, Japan and Singapore investors last year. [ID:nL21007909]

"This tactical move brings into question any foreign investment in major companies -- in particular investment from the Middle East," said Manoj Ladwa, senior trader at London spread betters ETX Capital. "I would expect further falls from companies with similar exposure."

"It's clearly a negative signal for the banking sector," said David Thebault, head of quantitative sales trading at Global Equities in Paris. "After stepping in at the beginning of the credit crisis to buy stakes in troubled banks, these guys (Abu Dhabi) are now saying: 'the recovery rally in financial stocks is over and the shares are now ripe for profit taking'."

FUNDRAISING AT KEY TIME

Singapore's state investor Temasek owns just under 2 percent of Barclays and its incoming chief executive may cut its holding in banks as he reallocates money to energy and consumer sectors, Nomura analysts said earlier on Tuesday. [ID:nSIN472073]

IPIC, an investment vehicle of the Abu Dhabi royal family, will have almost doubled its money since buying the mandatorily convertible notes (MCNs) in October, when Barclays raised funds privately rather than take a handout from the UK taxpayer. [ID:nL21007909]

The fundraising angered existing shareholders at the time. They said the Middle East investors were offered more attractive terms than they could get.

The MCNs are due to convert into about 1.3 billion shares at 153p per share before the end of this month. Including the conversion of other MCNs sold last year but excluding warrants held by Abu Dhabi and others, the stake sold represents just over 11 percent of the British bank.

Barclays shares have soared more than five-fold in the last three months, after Britain's financial regulator said its capital was adequate.

IPIC said it was also considering selling 1.25 billion pounds of another capital instrument it bought at the same time -- reserve capital instruments that pay annual interest of 14 percent -- but had no plans to sell its warrants.

Abu Dhabi invested up to 4.75 billion pounds in Barclays, including 1.5 billion pounds on warrants exercisable at 197p. Its stake will fall to about 5-6 percent with just the exercised warrants, from potentially just over 16 percent.

IPIC, which in March bought a 9 percent stake in German auto maker Daimler (DAIGn.DE), said it had a "high regard" for Barclays and its management and strategy, but it was focusing its strategy on hydrocarbon-related investments.

Sheikh Mansour bin Zayed Al Nahyan, a member of the Abu Dhabi royal who is chairman of IPIC and oversaw the investment, has an estimated $4.9 billion fortune and earlier this year bought English soccer club Manchester City. (Additional reporting by James Davey, Victoria Howley and Simon Falush in London and Blaise Robinson in Paris; Editing by Erica Billingham and Andrew Callus)

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