CIC, Thaksin and BlackRock: how PCP tried to pull other investors into Mansour’s part of the Barclays deal
Euromoney can reveal that advisers to Sheikh Mansour were courting other strategic parties to invest in Barclays at a time when the bank was marketing the importance of the cornerstone Abu Dhabi investor, raising questions about market confidence and disclosure. The revelations also shed light on the frustrations of China Investment Corporation about the transaction and the fund’s approach to dealmaking.
Euromoney’s article reveals for the first time the misleading information that was given out about the actual ownership of the securities that Sheikh Mansour was supposedly investing in during the Barclays capital raising.
But the documents seen by Euromoney also show that a number of other investors were almost dragged into the deal by PCP and Staveley – for reasons that are not clear, and that there were discussions about which Barclays might have had little or no knowledge.
|Thaksin Shinawatra, former Thai prime minister, pictured with Mansour adviser Khaldoon Al Mubarak|
It appears that negotiations between Barclays, Mansour and PCP began in earnest in mid to late October 2008. On October 26, Barclays’ head of corporate legal counsel, Matthew Dobson, emailed Staveley and Eadie with a detailed schedule for the capital raising, on which due diligence was due to be completed on October 28 and an RNS announcement two days later. Dobson also circulated draft term sheets for the MCNs, the RCIs and the warrants. Within a week, PCP had sent out the documentation to a host of other potential investors. On October 27, PCP emailed its ‘Project Mandolin’ presentation to Pairoj Piempongsant, a key aide of the former billionaire Thai prime minister Thaksin Shinawatra, who was then exiled to Dubai after being ousted in a 2006 military coup in Bangkok. Pairoj had been intimately involved in the September 2008 sale by Thaksin of football club Manchester City to Sheikh Mansour, on which Staveley had also advised.
The well-connected Saudi banker and royal fixer Abdulaziz Barakat Al-Hamwah was also emailed Staveley’s Barclays dossier on the same day.
A day later, Staveley’s Barclays proposals were sent to Ken Griffin, the president of BGR Capital & Trade, which he had set up in 2008. BGR C&T is part of the leading US lobby group BGR, which was established by Ed Rogers and Haley Barbour in 1991.
And on November 5, the Barclays material was sent to Larry Fink, head of New York-based investment house BlackRock.
|Larry Fink, head of BlackRock|
It is not clear why Staveley sought out these investors. Given there were, at the time, apparent doubts about the ownership of the PCP Gulf Invest vehicles through which the investments would be made, and which Staveley and Eadie were the official owners of, she might have been concerned about the possibility of not having sufficient funding in place. Or it might simply have been that Mansour and his advisers were, at that stage, unsure if they wanted to make a commitment for the whole £3.5 billion to Barclays, no matter what statements had been made publicly around the capital raising. It also raises questions about market practice and confidentiality. Sensitive market information was sent out to third parties before the official announcement of the deal eventually took place on October 31. Did Barclays know this information was being spread? And what steps were taken to ensure that people receiving it did not act on the information?
BGR’s Griffin was certainly quick to pick up on a potential opportunity. A week later he contacted Staveley with his own take on the Barclays transaction.
In this version, BGR Capital & Trade would be “allocated up to 50% of Sheikh Mansour’s pending investment in Barclays to resale [sic] to targeted investors”. For this, BGR would earn a 1.5% commission on £750 million of RCIs; and 3% commission on £1 billion of RCNs. PCP would pay these commissions to BGR, which could also charge investors an additional 1% to the fees earned from PCP. BGR “would endeavour to place units in slices valued at £100 million or more”.
That meant big-name investors. In the post-financial crisis world they do not come much bigger than China Investment Corporation.
And CIC wanted in on the deal. Porter Bibb, managing partner of US merchant bank MediaTech Capital Partners, contacted Fei Zou, managing director of the equity investment department at CIC in Beijing, on December 4 to say: “Because it was more than a little difficult for Amanda and PCP to put together [the deal] with Barclays, Sheikh Mansour, and the Qatar Investment Authority, it has taken longer than expected to firm up. She is in Dubai, sorting out which pocket the securities will come from, but will call you as soon as possible with confirmation of your request for £500 million of 14% RCIs plus warrants and details regarding costs and closing.”
But this wasn’t the news that Zou wanted to hear, and clearly it did not go down well with his bosses.
On December 5 he wrote to Staveley: “As expected, the senior management who were previously briefed on the potential deal with Sheikh Mansour and QIA regarding Barclays were more than frustrated by the current outcome. As an organization that is already over-weighted in the financial sector, our primary motive to entertain this potential opportunity is very simple – trying to establish strategic relationship with our counterparts in the Gulf region. We believe [,] in a world that is in desperate need of capital, our alliance will prove to be powerful and profitable.
“The sequence of how things developed since we were first approached proved to be troublesome. From our perspective, the entire engagement is more about relationship than economics or profit maximization. Although we were offered to take on the entire allocation of the 750 million pounds of RCI and attached warranties for free, we only considered to take a portion of the allocation from the beginning. I believe the reason why you decided to approach us was also for long-term relationship. However, if we let things sit where it stands today I am afraid it will have serious long-lasting negative impact to the relationship between CIC and the organizations you are representing. That will be worse than if we never had any contact with each other.”
Zou delivered a tough parting shot: “As the highest profiled investment organization out of China, and an organization with a deep pool of capital and unmatched connection in China, we take credibility seriously, and we only value people and organizations what [sic] think and behave alike.”
Griffin advised Staveley that the “situation can be repaired if done with gentle tact and charm”.
That only seemed to buy a little time. By December 14, Zou had written to Staveley’s PCP colleague, Jonathan Mowatt – who told Zou that Staveley was unavailable with “visa issues” at the time – to express strongly that matters had been handled inappropriately, and that on December 16 CIC would pull out of the investment if it had not yet been completed.