Barclays agrees to sell iShares

Barclays has raised money privately rather than seek government aid

Barclays Bank has agreed a deal worth£3bn ($4.4bn) to sell its iShares business to CVC Capital Partners to raise cash.

However, Barclays is having to provide £2.1bn of financing for the deal - in effect, a loan to CVC to help it buy the asset management business.

Barclays shares closed up 12% after the announcement at 177.5 pence.

Barclays' President Bob Diamond, one of the highest paid people in the City of London, stands to gain up to £4.7m.

Mr Diamond, has 300,000 shares in BGI Holdings, the Barclays arm which owned iShares.

"This transaction realises significant value for Barclays," said the bank's chief executive John Varley.

In normal times, that would be seen as a deal so bad for the bank that shareholders would be volunteering to throw themselves off Beachy Head Robert Peston, BBC Business Editor Barclays' painful deal

"iShares has experienced rapid growth over the past several years and has reached a point where it can develop further on a stand alone basis," he added.

Cheap access

Barclays will still maintain links with iShares.

"Barclays shareholders will benefit from a reinforcement of our capital base and an ongoing commercial relationship with iShares," said Mr Varley.

The iShares funds, Exchange Traded Funds (ETFs), have proved very popular in the US, but have yet to really take off in the UK.

ETFs are listed shares that pool investors' money and track the performance of particular indexes.

They are a cheap way for private investors to gain access to many different shares through a single holding. For example, the iShares FTSE 100 will track the performance of the FTSE 100 through a single share.

While other High Street banks have accepted government money to help them through the credit crunch, Barclays has chosen instead to raise finance privately.

Last year, the bank raised £7bn from investors in the Middle East.

The bank has also not taken part in the government's insurance scheme for toxic assets.

The Asset Protection Scheme uses government money to insure banks' riskiest assets against further losses.

Barclays reported profits before tax of £6.08bn for 2008.