Battle for Barclays Africa – Abraaj-led group seeks 35% stake. Trump Diamond?

JOHANNESBURG — In any sale, the seller sits in a position of ‘more’ power if it attracts more than one suitor, and the battle for Barclays Africa seems to be heating up. The Bloomberg article below says an Abraaj-led group is planning to bid for a 35 percent stake in the African lender, valued at about $2.6 billion. Abraaj is an emerging market private equity fund, and while it seeks a minority stake, the bid still comes up against Bob Diamond’s attempts to take control of the group. So who would be better for the group? Diamond has already enlisted the services of $185 billion group Carlyle. But both bids may be scuppered by the South African Reserve Bank, as they ‘don’t want private equity owning the banks’. Let the bidding wars begin. – Stuart Lowman

By Dinesh Nair and Ambereen Choudhury

(Bloomberg) – Buyout firm Abraaj Group is leading a group of investors planning to bid for a minority stake in  Barclays Plc’s African unit, according to people familiar with the matter.

Abraaj is working with financial advisers and is in discussions to team up with other investors including a Middle Eastern sovereign wealth fund, the people said, asking not to be identified as the information is private. The private equity firm may bid for as much as 35 percent of Barclays Africa Group Ltd., one of the people said.

A Barclays logo is pictured outside the Barclays towers in Johannesburg December 16, 2015. REUTERS/Siphiwe Sibeko
A Barclays logo is pictured outside the Barclays towers in Johannesburg December 16, 2015. REUTERS/Siphiwe Sibeko

A stake that size would be valued at about $2.6 billion at the market price. No final decision has been made, and talks may still fall apart, the people said.

Abraaj’s consortium doesn’t include former Barclays Chief Executive Officer Bob Diamond, the people said. Barclays was unlikely to agree to sell to its former chief, one of the people said. Diamond said in April he was weighing a bid with investors including U.S. private equity giant Carlyle Group LP.

Barclays Africa shares closed 1.3 percent higher in Johannesburg trading, while Barclays rose 1.5 percent in London.

Barclays sold about one-fifth of its stake in the African unit in the market earlier this month as part of CEO Jes Staley’s plan to retreat from the continent and raise cash to reduce its capital burden. The bank is restricted from selling more shares in the African business by a 90-day lock-up period.

Read also: Django Davidson: Barclays shorting Africa – No worse time to sell

Abraaj and its group of investors had previously held exclusive talks to buy the stake, but allowed them to expire so Barclays could sell shares on the market, one of the people said. The group is still in discussions to buy the stake, the person said.

Barclays Africa is South Africa’s third-largest bank and has operations in 12 nations with more than 12 million customers. While it continues to grow and has produced both increased profit and dividends, European and U.K. banking regulations have eroded the parent company’s ability to benefit from the expansion.

Abraaj, which manages about $9.5 billion in assets, raised $990 million for its third sub-Saharan Africa fund last year and made two investments — in South Africa and Nigeria. Dubai-based private equity firm is in the final stages of approval for three transactions in sub-Saharan Africa and will probably make further investments in the region before the end of the year, partner Sev Vettivetpillai said in an interview last week.

Read also: Barclays Africa beauty parade – hope winner a stunner, no frumpy bureaucrat

Representatives for Abraaj and Barclays declined to comment. A representative for Barclays Africa said that there has been “significant interest from various parties as evidenced by the recent accelerated book build,” and declined to comment further.

While Abraaj is looking at buying a stake in the business, South Africa’s central bank said it would oppose a full takeover from a private equity bidder.

“As a regulator we won’t be comfortable with a private equity play for any of the banks,” Deputy Reserve Bank Governor Kuben Naidoo said earlier this month. The central bank would “look quite negatively” on a buyout because these typically involve leverage and exit strategies, and banks need long-term commitments from shareholders with deep pockets, he said.

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