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Barclays has struck a deal with Brookfield Asset Management that could see the private equity firm become the majority owner of the bank’s payments business, ending a fraught process to offload the unit.
The UK-based lender announced the transaction on Thursday, setting out a seven-year timeline over which the Canadian firm could buy an 80 per cent stake in the business.
Barclays and Brookfield will aim to set the payments business up as a standalone unit over time with the bank set to invest £400mn, most of which will be deployed during the first three years of the partnership.
The sale of the payments unit, formerly known as Barclays’ merchant acquiring business, is part of a strategic overhaul by chief executive CS Venkatakrishnan to refocus the bank’s UK business and improve performance.
Barclays has been looking at strategic options for the business for more than a year, though Venkatakrishnan said last summer the process was complicated because of certain financial arrangements. The merchant acquiring business has largely focused on payment processing, including cards, online or contactless. The bank also offers other products such as fraud protection and system integration for retailers.
As part of the “strategic partnership” announced on Thursday, Brookfield will have the option after three years to buy a 70 per cent stake in the payments business at a market valuation to be determined at the time. If the sale goes through, Brookfield can convert a separate incentive into an additional 10 per cent stake.
The sale is subject to certain terms, which include Barclays getting back its full investment in the business. The bank said it expected to retain a stake of about 20 per cent.
Barclays announced in its full-year results for 2023 that it had taken a £350mn writedown related to its payments business and German consumer finance operations. The bank sold the latter to Austrian bank Bawag Group last year but did not disclose the valuation.
Brookfield has been pursuing a push into payments to diversify beyond its sprawling property portfolio. The firm hired Sir Ron Kalifa, the former head of payments group Worldpay, as head of its financial infrastructure strategy in 2023.
The Barclays deal is the first by Brookfield Financial Infrastructure Partners, which was launched by the private equity firm to invest in digital assets.
