Barclays bowed to shareholder protests yesterday, saying it would let existing stockholders in on a share issue originally earmarked for private Middle Eastern investors.
The British bank said the three Middle Eastern investors - Qatar Investment Authority, the Challenger investment vehicle led by the Qatari royal family, and Sheikh Mansour Bin Zayed Al Nahyan of the Abu Dhabi royal family - had offered to allow existing shareholders to purchase £500 million (R7.5 billion) worth of their combined £5.8 billion proposed investments.
"The board of Barclays has listened carefully to shareholders' views," the bank said in a statement outlining the change. Barclays also said that no bonuses would be paid to board members this year, and that all directors would offer themselves for re-election at its annual general meeting in April.
Over the past week there had been growing evidence that shareholders could vote against the proposed Middle Eastern injection when it goes up for approval next Monday.
On Tuesday, key UK investor advisory group PIRC told shareholders to vote against the capital raising plan. PIRC said the proposed transaction represented a "significant dilution" of existing shareholders' stakes. Last week shareholder advisory group RiskMetrics voiced concerns about the deal.
Barclays management last month agreed to take investments from the Middle East rather than participate in the UK government's recapitalisation plan, which was taken up by rivals Royal Bank of Scotland, Lloyds TSB and HBOS. Those banks all agreed to cede major stakes to the government in return for a combined £37 billion cash injection from the British treasury.
The market initially welcomed Barclays' decision to remain independent, but advisory groups have since questioned whether the deal it signed with Gulf investors would have been better than the treasury one.
The Middle East investors have been promised 14 percent annual interest over 10 years for preferred stock and the chance to buy £2.8 billion of common shares at a discount. The treasury plan requires banks to pay 12 per cent annual interest on preferred shares, which the banks can buy back any time.
Yesterday's announcement lets ordinary shareholders in on the high interest rate that the Gulf investors have been promised, and so should calm shareholder concerns that they are losing out.
"Barclays has clearly recognised the concern emanating from some of its shareholders," said Richard Hunter, the head of British equities at Hargreaves Lansdown Stockbrokers.
"While the amount of capital being made available is relatively small, it should … quell most of these concerns." Barclays slipped 4 percent to £1.48 in early London trade, while other major UK banks fell between 4 per cent and 9 per cent on concerns that the financial crisis would hit earnings.