Sign in Subscribe
Commercial banks

Barclays Set to Acquire Woolwich in $5.5 Billion Deal

Strategic Insights

— 1 min read

Barclays, Britain's third-largest bank, is reportedly negotiating a $5.5 billion deal to acquire Woolwich, a leading British mortgage lender. The potential acquisition would strengthen Barclays' home mortgage business and bolster its Internet banking strategy. If a deal is reached, it would be a significant move for Barclays, which has undergone significant restructuring under its CEO Matthew Barrett. The bank has made several cost-cutting measures, including eliminating 172 branches, and has recently launched a high-profile advertising campaign.

Key Takeaways:

  • Barclays is negotiating a $5.5 billion deal to acquire Woolwich, a leading British mortgage lender.
  • The deal would strengthen Barclays' home mortgage business and accelerate its Internet banking strategy by integrating Woolwich's comprehensive online banking operation.
  • Barclays has been on a tear in the last year under CEO Matthew Barrett, who has implemented cost-cutting measures, including closing 172 branches.
  • The bank has also raised its profile in Britain with a $22 million advertising campaign starring actors like Sir Anthony Hopkins and Tim Roth.
  • Woolwich shares have rebounded 27% since their record low of 245 pence on July 31, amid speculation of a potential takeover.
  • The potential acquisition could set off another round of consolidation in the British banking industry, with analysts citing Abbey National, Alliance & Leicester, and Northern Rock as potential takeover targets.
  • Credit Suisse First Boston is advising Barclays, and Schroder Salomon Smith Barney is advising Woolwich.

Statistics:

  • The deal would value each share of Woolwich at 362 pence, a 34% premium over the closing share price Tuesday.
  • The offer would be in cash and stock: 0.1175 shares of Barclays and 164 pence in cash for each Woolwich share.
  • Woolwich shares have jumped 72 pence to 341 pence, or about $5.12, while Barclays shares dropped 49 pence to 1,615 pence, or about $24.22.
  • The Barclays-Woolwich deal could spark a wave of consolidation in the British banking industry, with almost all mortgage lenders experiencing a decline in share price, making them attractive takeover targets.

Sources:

  • "Britain's Barclays Said to Prepare Bid for Woolwich" (Bloomberg)
  • "Woolwich Said to Be in Talks With Creditors" (The Wall Street Journal)
  • "Barclays Said to Have Chosen Advisers for Woolwich Deal" (Financial Times)

Read more