Barclays Buys Goldfish

Another American financial services company has decided to call it quits. Goldfish brand has decided to sell out to Barclays in order to close down in the US. Recently Discover financial services sold Goldfish to Barclay. Discover has been around since 1986 and was one of the biggest issuers of cards in the US. This announcement to sell Goldfish comes on the tail of CItibank selling Egg. Egg sold their US online bank. To do this they had to write to their 161,000 consumers in the US to tell them they could no longer make charges on their cards since they were selling the bank in its entirety. Egg was a part of one of the largest banks in the US. Unfortunately Citigroup was affected by billions of dollars in write downs in order to save the company. They had to do something so unloading the unprofitable business of Egg to the British seemed like a good idea.

This new sale by Discover is seen as the same type of save as their risk was seen as unacceptable as well. Discover was actually apart of Morgan Stanley until last year when the conditions in the UK market began to be seen. The difficulty in gaining a profit from Discover required the sale of Goldfish and the actual Discover services sold from Morgan Stanley.

Barclay agreed to pay 35 million pounds in cash to take over the 1.7 million Goldfish card clients with balances. These balances are totalling 2 billion at the moment. Discover is going to have to take a one off post tax in this quarter in order to complete the sales. This total is going to be 210 million USD or 108 million in pounds that will actually create a lost on the sale.

Apacs has also been doing a little research regarding credit cards and the figures associated with the sale. It seems that the use of credit cards of Christmas increased by 4 percent over 2006. This increase has allowed for 32.2 billion in credit card debt. However the debt is the slowest growth the UK economy has seen in the last four years, which may be a sign of hope. David Nelms is the chief executive at Discover. He mentioned the other day that funding and operation costs in the UK continue to be a challenge and it is one that their company can no longer deal with as they need to focus on their own turf.

Discover did not sell goldfish without issue though. They took a charge of 391 million US against Goldfish in the fourth quarter in which they were at a pre tax loss of 88 million USD for the period. Their international arm suffered even more with a pre tax loss of 423 million USD as a result of the charge. Combined with the great losses Discover suffered they had to do something about discharging the problem area. This is what has led to the sale of Goldfish to Barclay.

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