Barclays divorce still some way off
Although Barclays Africa has reached an agreement with parent Barclays plc about the costs of separating the two companies, the British bank’s sell-down of its majority stake in its African subsidiary is still some way off.
Although Barclays Africa has reached an agreement with parent Barclays plc about the costs of separating the two companies, the British bank’s sell-down of its majority stake in its African subsidiary is still some way off.
The British bank has agreed to pay a “divorce settlement” of £765m, or R12.8bn at the exchange rate at the end of 2016, to fund Barclays Africa’s investments in new technology, rebranding and other separation costs.
Barclays Africa CEO Maria Ramos said this did not necessarily mean a deal to sell the bank had been struck.
“The two things are not related,” she said after the release of Barclays Africa’s results for the year to December last week. “[The separation agreement] is to get the approvals to reduce the shareholding…. To get it, the regulator will want to understand how the separation will happen; the component parts of it, the costs …”
Ramos had said earlier Barclays plc’s sell-down, which it announced at the presentation of its year-end results in March 2016, was at the regulatory approval phase. The approvals were needed before Barclays plc could bring its shareholding below 50%, whether through a book build process or other mechanism.
Barclays plc successfully sold a 12.2% stake to money managers through an overnight book build process in May 2016, pocketing R13.1bn and bringing its shareholding to 50.1%. It plans to offload more to achieve “regulatory deconsolidation” of the African subsidiary in its accounts, which would mean holding a stake of about 20%.
A number of parties have expressed interest in the shares, including former Barclays plc CEO Bob Diamond, who officially announced a bid to buy all of the available shares through a consortium comprising Diamond’s investment firm, Atlas Merchant Capital, private equity firm Carlyle, and Ugandan billionaire Ashish Thakkar’s Mara Group.
Diamond has said nothing further about buying Barclays Africa after he said on Bloomberg Radio that Carlyle had pulled out of the bid due to worries that regulators would not support an offer from a private equity firm.
Dubai-based private equity firm Abraaj has expressed interest in snapping up the shares, as has the Public Investment Corporation, which manages public servants’ assets and is reportedly trying to corral black investors together.
But fund managers such as PSG Wealth’s Adrian Cloete and ClucasGray’s Andrew Vintcent are keen on another book build in what they call a quality firm.
However, the number of shares up for grabs could drop after the implementation of a broad-based black economic empowerment scheme, which was part of the separation package.
Barclays plc has agreed to supply 1.5% of Barclays Africa’s market capitalisation — or R2.1bn at the company’s share price on December 31 — to establish the scheme.
This will be the second such scheme for the company — its first, with the Batho Bonke consortium, matured in 2012. Barclays Africa also wants to create a staff share ownership scheme within 12 to 18 months.
Barclays Africa said it was unable to provide specifics on its empowerment deal until it had been “defined”, but chairperson Wendy Lucas-Bull said at its annual general meeting in 2016 that such a deal formed part of Barclays Africa’s separation negotiations with its British parent. The two groups have been negotiating the terms of the separation package since Barclays plc announced its intention to sell down its interest.
Registrar of Banks Kuben Naidoo said the Reserve Bank had been in talks with the two groups regarding the British lender’s “divestment process”.
“These engagements have been constructive,” he said.
“As a regulator, we cannot divulge confidential details of these discussions at this stage.”