Nov. 24 (Bloomberg) -- Barclays Plc won shareholder support to raise 7 billion pounds ($10.5 billion) without surrendering control of its lending or dividends, Chairman Marcus Agius said.

The bank, the second largest in the U.K., got more than 85 percent of shareholders to vote in favor of four resolutions calling for the sale of stock mainly to funds from Qatar and Abu Dhabi. Barclays, which is bypassing ordinary shareholders and the U.K.’s rescue plan as it complies with new capital requirements, rose 10 percent in London trading, the most since Oct. 14.

Barclays made the “extremely difficult” to avoid government restrictions on when it pays dividend, where it lends and the risks it takes, the company said today in a statement. “We’re in the firing line,” said Agius, who is up for re-election in April and started today’s vote as investors were still shouting questions. Royal Bank of Scotland Group Plc and two other U.K. banks agreed to raise 37 billion pounds in the U.K. bailout.

“They have made it very clear that they think the government will lean on banks in which it has stakes for the interest of U.K. taxpayers,” said Simon Willis, a London-based analyst at NCB Stockbrokers Ltd. who has a “reduce” rating on Barclays. “That may well have a bearing on profitability.”

Barclays, which paid $1.75 billion to buy Lehman Brothers Holdings Inc.’s North American unit earlier this year, rose 13.3 pence to 146.5 pence in London. The shares are down 70 percent in this year, compared with a 65 percent drop for the Bloomberg Europe Banks and Financial Services Index.

Investors Anger

Barclays’s decision to sell about a third of itself to sovereign wealth investors from the Mideast angered some of its largest shareholders. Legal & General Investment Management, Aviva Investors and Royal London Investment Management Ltd. said earlier this month that the Mideast money was too expensive and too dilutive to other stakeholders.

The Association of British Insurers said Nov. 18 that Barclays capital plan represented a “serious breach” and gave it the lowest rating. The association, whose members account for about 20 percent of investments in the London market, stopped short of advising shareholders to vote again the share sale.

Investors also complained that Barclays bypassed shareholders’ U.K. entitlement to have rights of first refusal on share sales.

“We greatly regret the fact that our many private shareholders who have supported us loyally over the years were not able to participate in the capital raising,” Agius said.

‘Unclear’

Legal & General, which owns about 5 percent of Barclays, said last week it would put aside objections and back the share sale. F&C Asset Management’s director of corporate governance, George Dallas, said today he supports the plan only because there is no alternative. “It is unclear” whether the benefits of independence will outweigh the costs of the plan, he said.

Agius began today’s vote as some shareholders were still on their feet, shouting questions to the board. “I’ve never seen a chairman of Barclays behave in such an arrogant fashion towards private investors as Mr. Agius at the end of the meeting,” said Peter Thomas, a private investor.

Barclays is intent on resuming dividend payments next year and avoiding the U.K. requirement to emphasize domestic rather than international lending, Agius said.

“The U.K. government would expect Barclays to put government capital first and foremost to the aid of domestic customers,” Agius said. While Barclays’s U.K. business is important, the company has diversified its revenue stream to include lending and investment banking outside Britain, he said.

‘Risk-Taking Business’

Barclays got about 40 percent of its profit outside of Britain in the first half and 16 percent from securities trading. “Barclays as a bank is a risk-taking business,” Chief Executive Officer John Varley told shareholders. “What we have to be able to do is manage that risk.”

Barclays has more than enough capital to endure the economic downturn and will decide on when to restart dividends in the second quarter, Varley said.

Agius and Varley face another shareholder vote in April and pressure to show they were right to reject the U.K.’s offer to help recapitalize the bank.

“The extra cost of the new capital that we are raising will be very significantly exceeded by the economic benefits of complete strategic freedom,” Agius said. “We can generate a higher return for shareholders without government money.”

Barclays agreed Oct. 31 to sell 2.8 billion pounds of convertible stock and 3 billion pounds of preferred stock to Qatar Holding LLC, Challenger Universal Ltd., an investment vehicle set up by Qatar, and Sheikh Mansour Bin Zayed Al Nahyan, a member of the Royal Family of Abu Dhabi.

14 Percent Interest

The preferred stock pays an annual rate of interest of 14 percent until 2019 and gives the investors warrants with the option to buy as much as 1.5 billion of ordinary shares. The deal, which cost Barclays 300 million pounds in fees, will dilute ordinary investors’ holdings by about 31 percent.

The bank changed the deal on Nov. 18 to allow institutions to buy 500 million pounds of the preferred stock reserved for the sovereign funds without the warrants. The capital raising completes Nov. 27 and the securities can start to be traded the day after.

Shareholders representing about 61 percent of Barclays stock voted on the capital raising plan, based on figures contained in the company’s statement today.

“We fully expected that some of our shareholders would be unhappy about some of the aspects of the capital raising,” Finance Director Chris Lucas said. “We listened to what they had to say. We’ve had a full dialog.”

The U.K. will charge 12 percent interest on preferred stock it buys from RBS, HBOS Plc and Lloyds TBS Group Plc. London-based Lloyds TSB got shareholder backing to raise 5.5 billion pounds on Nov. 19. RBS’s government-backed plan to sell 20 billion pounds of stock closes at 11 a.m. tomorrow.

To contact the reporters on this story: Ben Livesey in London blivesey@bloomberg.netKevin Crowley in London at kcrowley1@bloomberg.net

Last Updated: November 24, 2008 13:05 EST