Barclays PLC BCS has completed the acquisition of the retail banking business of Tesco Personal Finance plc. The deal was announced this February.
Further, Barclays UK has entered into a long-term strategic collaboration with Tesco Stores Limited.
Details of the Acquisition & Partnership Pursued by BCS
The acquired business comprises credit cards, unsecured personal loans, deposits and operating infrastructure, which will continue to operate under the “Tesco Bank” brand and the ownership and management of Barclays UK following the completion of the acquisition.
The total consideration payable by Barclays UK at completion was £0.6 billion, subject to customary post-completion purchase price adjustments. The company will get tangible net assets of £1 billion, consisting of £4.2 billion of gross credit card receivables and £4.2 billion of gross unsecured personal loans, together with £6.8 billion in customer deposits.
Moreover, the exclusive strategic partnership with Tesco Stores Limited is initially for 10 years, enabling Barclays UK to distribute credit cards, unsecured personal loans and deposits using the Tesco brand.
Furthermore, it allows Barclays UK to explore other opportunities to provide financial services to Tesco clients via Tesco's distribution channels and on the open market.
Rationale Behind Barclays’ Buyout & Collaboration
The deal is anticipated to result in the recognition of an estimated pre-tax profit of £0.3 billion in the fourth quarter of 2024, generating a 50 basis points (bps) accretion for 2024 group return on tangible equity (RoTE).
The consideration has been paid through BCS’ existing cash resources. It is expected to reduce its common equity tier 1 (CET1) ratio by 20 bps, primarily driven by an addition of £7 billion of risk-weighted assets.
Barclays UK will integrate the acquired Tesco Bank business over time, and the deal is estimated to be accretive to the company’s RoTE following the integration.
Additionally, the strategic collaboration builds on Barclays UK’s existing strategic partnerships with other leading UK retail, consumer electronics, and loyalty program brands.
Vim Maru, CEO of Barclays UK, stated, “Today marks a significant step as we continue to grow Barclays UK. We will bring the strength of both businesses together, benefitting customers and colleagues. I am excited that the combination of our brands, alongside the benefits of Clubcard and its loyalty scheme, will support millions of households across the UK with their financial needs.”
BCS Price Performance & Zacks Rank
Over the past six months, shares of Barclays have gained 20.6% against the industry’s decline of 9.4%.
Image Source: Zacks Investment Research
Currently, BCS carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Acquisitions Done by Other Finance Companies
Last month, Blue Owl Capital Inc. OWL agreed to acquire the business of digital infrastructure fund manager IPI Partners, LLC from an affiliate of ICONIQ Capital and an affiliate of Iron Point Partners for nearly $1 billion.
This acquisition is intended to capitalize on the burgeoning market opportunity for financing data centers and the growing investor appetite for cloud and AI-driven investment methods.
The deal is expected to be neutral to Blue Owl's earnings in 2025 and somewhat accretive in 2026. OWL will collaborate with an ICONIQ affiliate to ramp up the company's future growth.
Similarly, BlackRock, Inc. BLK acquired Global Infrastructure Partners, a private equity company.
The acquisition creates an industry leader in infrastructure, spanning equity, debt and solutions and offers a wide variety of infrastructure sector knowledge and exposure in existing and emerging economies. The combined infrastructure platform will be branded as Global Infrastructure Partners, a division of BlackRock.
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