Painstaking separation
As the breakup of Barclays Africa continues, it looks as if no single buyer will take control
Is Barclays Africa (BAGL) destined to become an orphan with no parent company? It has been five months since the book build in which UK lender Barclays Plc disposed of 12,2% of its holding in BAGL to a wide range of shareholders (see Financial Mail May 12-May 18). That was the easy part, and with 50.1% of the shares, Barclays is just a handful of shares away from relinquishing control.
BAGL deputy CEO David Hodnett says the process has not taken longer than expected, as there was always a twoto three-year horizon for completion.
BAGL and Barclays Plc have the complex task of ensuring that the operational separation of the two groups is orderly and, of course, that it preserves value for both sets of shareholders.
Barclays was at least able to give some news to impatient shareholders and analysts last week.
It has sold its 150-year-old Egyptian subsidiary to Attijariwafa Bank, the largest bank in Morocco, for US$500m. Barclays Plc and the then Absa could not agree on the right commercial terms to buy Barclays in Egypt or Zimbabwe, and officially BAGL has no regrets.
Andrew Vintcent, a portfolio manager at ClucasGray, says he can’t see any reason why most shareholders wouldn’t want to increase their holding in BAGL through a second round of book building.
“It is on a dividend yield of 6,5% and a p:e of nine, and a book build would be at a discount to that. And it’s not as if it is a bad business. It is well managed with a strong SA brand in Absa.”
In the half year to June, BAGL, under CEO Maria Ramos, had headline earnings per share growth of 7%, as good as market leader FirstRand.
And BAGL has continued to evolve in spite of the distraction of the divorce.
Hodnett, a competent executive, has been put in charge of the entire SA banking business and promises the component businesses will work much closer together, while former Tiger Brands head Peter Matlare — though he has a controversial past — is in charge of African operations and has already done a lightning tour of all the operations, no doubt relieved that there aren’t any flour mills.
Barclays will be forced to consolidate BAGL in its accounts until it reduces its holding to 20,000 19,000 18,000 17,000 16,000 15,000