Barclays announces ‘preferred bidder’ for iShares unit

It looks as if Barclays’ iShares exchange traded fund business will be sold to a Luxembourg-based global private-equity firm. “We now have a preferred bidder, CVC Capital Partners,” London-based Barclays PLC said in a statement today. Barclays was scant on details, but the sale, expected to be finalized as early as the end of this week, is expected to fetch between $4 billion and $5 billion. As of Dec. 31, iShares was the largest ETF provider in the United States by assets, with $254.7 billion spread across 178 ETFs. Barclays announced this month that it was in discussions to sell the iShares business, one of its crown jewels, as the bank looks to raise cash to bolster its capital base. The sale is expected to be limited to the iShares business, not the bank's San Francisco-based Barclays Global Investors unit, of which iShares is a part. Reaction to the proposed sale is mixed. “I think it could have some troubling aspects for [ETF] investors,” said Jim Lowell, the Needham, Mass.-based editor of Forbes ETF Advisor, a monthly newsletter. That’s because private-equity firms don’t buy companies as a long-term investment, said Mr. Lowell, who is also a partner and chief investment strategist of Adviser Investment Management Inc., a Newton, Mass., firm with about $1 billion under management. Private-equity firms buy companies with the intention of selling them for a short-term gain, putting their interests at odds with those of long-term fund shareholders, he said. That may be true, but the fact that anyone is willing to pony up the cash for an ETF company in a time when credit to finance such deals is hard to come by proves that ETFs are the way of the future, said Sean O'Hara, president of Paoli, Pa.-based RevenueShares Investor Services, a division of Pacer Financial Inc. “As an ETF participant, we would view it as a positive sign that we’re in the right business,” he said.