Barclays investors rage at Gulf money

By SIMON DUKE FOR MAILONLINE
Updated: 06:08 EDT, 25 November 2008

Barclays received a stinging slap in the face from its investors after fewer than half endorsed its deeply contentious £7.3bn capital raising.

Waning support: Less than half of Barclays shareholders endorse the Middle Eastern cash injection

Only 46% of all shareholders voted in favour of the plan, which will see Middle Eastern investors grab a one-third share of the bank.

However, as most of the rebels abstained or did not vote at yesterday's stormy shareholder meeting, the fund raising was waived through.

Investors accused the bank's chief executive John Varley of forcing their hand after he shunned a cheaper government loan last month.

George Dallas, of major investor F&C, said: 'We object to being put in a position where, if we vote against, we're put in an even worse position,' he said.

Dallas indicated that F&C had voted for the contentious deal, but only because Barclays had presented shareholders with a 'fait accompli'.

'The board should not see passage of the fundraising as a sign of support,' the fund manager added.

The decision by F&C to speak out in public underlines the depth of anger in the City over Barclays' capital-raising move.

Institutional shareholders like F&C usually voice their criticisms in private meetings with big publicly-listed companies like Barclays. A public reprimand of this kind is almost unprecedented.

Dallas argued that the fundraising was 'a clear and egregious breach of preemption rights' - the principle that gives existing shareholders first refusal on new shares when they are issued.

Varley admitted that it was 'regretful' that the principle of pre- emption had had to be abandoned.

Justifying the move, he said that the recent collapse of Wall Street giant Lehman Brothers, which brought the financial system close to collapse, meant Barclays had had to act 'swiftly and decisively'

'We didn't have the luxury of time here,' he explained.

Trevor White summed up the mood of the rank-and-file small shareholders as he said: 'It feels like we've been invited to a game of Russian roulette, the only difference is all the barrels are loaded.'

Barclays turned its back on a broader Government bank bailout of the financial system because it did not want the ministers dictating company policy. By rejecting the Government's money, it can, for example, continue paying massive bonuses to top executives, like investment bank boss Bob Diamond, as well as paying dividends to shareholders.

Varley also said the board did not want the government ' looking over its back' when it came to lending to small businesses and homeowners.

'The government would want to ensure that incremental money was put to work for a domestic agenda,' the Barclays chief said.

As a sop to shareholders, the entire 19-person Barclays board has put itself up for re-election at next month's AGM, and the top five executives have waived their bonuses for this year. One angry shareholder, Roger Crouch, signalled that the bonus moratorium wouldn't be enough to restore his faith in Barclays' management.

'From 2009, you'll be able to start milking the bank and its shareholders again.'

Roger Lawson, of the UK Shareholders Association, said: 'I deplore the lack of participation by all shareholders.'

The meeting, which was attended by hundreds of shareholders, descended into farce when Agius closed the question and answer session of the meeting. One shareholder, who had been denied the right to ask a question, had to be restrained by security guards when he tried to approach the board members on the podium himself.