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Barclays index business auction hits snag- sources

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October 14
8:29 PM 2014

Barclays Plc's (BARC.L) auction of its index business, which includes the widely used Barclays U.S. Aggregate Bond Index, has hit a snag, after would-be buyers realized some crucial bond pricing data that does not belong to the British bank will not be part of the package, two people familiar with the situation said.

The bidders, which include McGraw Hill Financial Inc's (MHFI.N) S&P Dow Jones Indices and financial information services provider Markit Ltd (MRKT.O), learned that some of the data used to support the pricing of the securities in the Barclays indices cannot be part of the deal because it is owned by third parties, including Bloomberg LP and Interactive Data Corp, the sources said. These entities will not allow the data to be sold as part of the deal, the sources said. When customers license indexes, they license the data that comes with it.

Barclays, McGraw Hill and Markit declined to comment. Bloomberg and IDC were not immediately available for comment.

If the bank cannot sell the data with the index business, any buyer will have to either strike separate deals with the data providers or find alternative sources of data, which could lead to some clients abandoning the business, the sources said. The business was expected to fetch more than $1 billion, but the new realization makes it harder to strike a deal and could lower its value, they said.

Deal negotiations have been held up around these issues, but the sources said they could be resolved and a deal could still be announced shortly.

The Barclays business, called Index, Portfolio and Risk Solutions (IPRS), includes a basket of more than 98 major indexes, according to the unit's website. The Barclays U.S. Aggregate Bond Index is among the platform's best-known offerings. Besides indices, the business also includes a risk solutions software tool used by institutional investors to analyze their holdings.

Barclays obtained some of the business as part of the Lehman Brothers acquisition during the financial crisis.

The sale comes as some traditional owners of index businesses look to exit as regulators scrutinize benchmarks following the rigging of the London interbank offered rate (Libor), an interest rate benchmark.

Experts have said other banks that offer benchmarks may also decide it is not worth owning the businesses. Meanwhile, others such as S&P and Markit are attracted to the business as investors pour billions of dollars into passively managed funds.

It is not clear why the issue did not crop up earlier in the sales process.

Barclays put the business up for sale after receiving interest from MSCI Inc (MSCI.N) and other companies last summer. By last month, the bank had narrowed the list of bidders to S&P Dow Jones Indices and Markit, sources have previously said. Bloomberg was one of the bidders for the business but had not made it to the final round, they said.

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