Barclays 2011 Annual Report Download - page 269

41 Acquisition of subsidiaries
In April 2011, Barclays acquired the third party investments in Protium for their carrying value of £163m and restructured the related management
arrangements. This resulted in the general partner interest being acquired by Barclays for a nominal consideration and the remaining interest in Protium
held by Protium’s investment manager, redeemed for consideration of £50m (in accordance with the performance fees that would have been due
under the original agreement, based on investment performance to date). Barclays become the sole owner and controlling party of Protium, which is
consolidated by the Group. There was no gain or loss and no goodwill arising as the impairment on the loan was already calculated by reference to
Protium’s net asset value of £5,856m.
As part of this transaction, US$750m of proceeds from a partial redemption of the loan to Protium was invested into Helix, an existing fund managed by
Protium’s investment manager. This represents a majority interest in the fund, which has also been consolidated by the Group.
The pre-acquisition carrying amounts of the acquired assets and liabilities, stated in accordance with the Group’s accounting policies, were equal to
their fair value on acquisition as set out below. There was no gain and no loss arising on the transaction.
Fair values
£m
Assets
Trading portfolio assets 4,731
Financial assets designated at fair value 1,004
Derivative financial instruments 5
Loans and advances to banks 472
Reverse repurchase agreements 29
Other assets 46
Total assets 6,287
Liabilities
Deposits from banks 1
Trading portfolio liabilities 93
Financial liabilities designated at fair value 76
Derivative financial instruments 23
Repurchase agreements 24
Other liabilities 51
Total liabilities 268
Net assets acquired (Group share 100%) 6,019
Considerations – cash 163
– loan 5,856
Total consideration 6,019
The Group’s exposure to Protium prior to acquisition represented a loan. Subsequent to acquisition the underlying assets held by Protium were
consolidated by the Group and have been integrated into the corresponding business lines.
The contribution of Protium and related underlying assets on the Group’s profit before tax for the year of £55m reflected a £223m impairment release
and £36m interest income on the loan prior to acquisition, offset by £204m post acquisition fair value reductions in the underlying assets offsets by
gains arising on the unwind of structured assets. Post acquisition losses comprised £27m gain on US sub prime and Alt-A, £249m losses on
commercial mortgage backed securities, £92m gains on CDO and other assets, £56m of net interest and other income, £74m of funding charges and
£56m of fees to Protium’s investment manager.
The £50m consideration paid by Protium to redeem the remaining interest held by its investment manager represents the settlement of an existing
liability. As pre-acquisition impairment was calculated by reference to Protium’s net asset value, this amount was reflected in the impairment charge and
did not give rise to a loss on acquisition.
At the acquisition date, the contractual amounts due to maturity on the acquired assets were £28bn. These assets are predominantly held for trading
purposes so are not expected to be held to maturity.
Acquisition related costs of £nil have been included in operating expenses. The aggregate net outflow of cash from acquisition during the year was
£163m.
During the year, Barclays acquired £2.1bn gross consumer credit card assets from Egg UK, a £130m corporate card portfolio from MBNA Europe Bank
Limited and a $1.4bn Upromise by Sallie Mae credit card portfolio from FIA Card Services, N.A. (part of Bank of America). These acquisitions were asset
purchases and therefore, have not been included in the table above. In addition Barclays acquired the Baubecon portfolio of German residential
properties following a debt restructuring transaction for £0.8bn. The properties have a current fair value of £1bn and are accounted for as investment
properties.
Barclays PLC Annual Report 2011 www.barclays.com/annualreport 267
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