Barclays Africa bid: PIC-backed Motsepe vs Diamond. Local is likely winner.

Yesterday we pointed to the irony of Barclays Africa again becoming a vehicle to promote economic nationalism. This time around, though, the targeted beneficiary is black empowerment rather than Afrikaners. Another irony lies in the likely new owner, BEE icon Patrice Motsepe’s African Rainbow Capital, run by former Sanlam chief executive Johan van Zyl. Although Motsepe’s first fortune was made in mining, his more recently added billions accrued from an attractive equity deal cut for him when he became Sanlam’s empowerment partner. A big part of the profit generated on that investment was due to Van Zyl’s fortuitous 2005 decision to sell Sanlam’s 124m shares ABSA as part of the transaction that saw Barclays Plc acquire control of the bank. That R10bn was invested into Sanlam’s own shares – a great capital allocation decision as its stock outperformed Absa’s three-fold. With the State-controlled PIC now having shown its hand, Motsepe’s outfit is the hot favourite to acquire control of the country’s largest retail bank. The energetic Van Zyl, who turns 60 on June 1, will enjoy the irony. He’ll also fancy his chances of rejuvenating Barclays Africa. With good reason. – Alec Hogg

By Renee Bonorchis

(Bloomberg) — The Public Investment Corp., Africa’s biggest fund manager, said it’s forming a group of black investors to buy a stake in Barclays Africa Group Ltd. in a bid to ensure the bank comes back under the control of South Africans.

“There are discussions with institutional investors managing black money, such as pension funds,” Dan Matjila, head of the Pretoria-based PIC, said by phone on Monday. As yet it’s difficult to say how much of a stake the group may bid for because “we don’t have the check book to take it all, but we are looking at foreign partners too,” he said.

A screen displays the ticker symbol and information for Barclays on the floor of the New York Stock Exchange (NYSE) in this February 9, 2016 file photo. REUTERS/Brendan McDermid/Files

Britain’s Barclays Plc holds 50.1 percent of the South African bank and plans to reduce that stake further after a share sale earlier this month. The South African Reserve Bank has said it wants bank owners to have stability, deep pockets and long-term plans. Ex-Barclays Chief Executive Officer Bob Diamond said in April he and investors including U.S. private equity giant Carlyle Group LP are working on a potential bid. Dubai-based Abraaj Group is also planning a bid, people familiar with the matter said on May 15.

The PIC has held talks with Diamond, Matjila said, declining to comment about whether the money manager would be willing to invest alongside him. The PIC would need to determine if Diamond is a good partner should Barclays be prepared to sell the unit to him, the Financial Times reported, citing Matjila. It would be good to have offshore money supporting the transaction because of its size, he was cited by the London-based newspaper as saying.

Permanent Structure

“We want a structure with permanent capital,” Matjila told Bloomberg News on Monday. Like South Africa’s FirstRand Ltd., which is controlled by a holding company made up of its founders, “a holding company structure works better. The cost structure works better and the holding company can then hold related businesses like insurance or asset management. That’s most desired, but requires a lot of cash,” he said.

Read also: Barclays Africa – Bad loans rising as economy wanes. Parent ‘pleased’ with buyer interest. 

It’s unclear whether or not the likes of Abraaj or Carlyle would be able to offer permanent capital, according to Matjila. The PIC would like the deal to happen quickly and Barclays wants to fix its regulatory issues as quickly as possible, he said, adding that there have also been discussions with South African billionaire Patrice Motsepe’s African Rainbow Capital, “but nothing is firmed up.”

Johan van Zyl, chief executive officer of African Rainbow Capital, declined to comment.

The PIC oversees almost 2 trillion rand ($128 billion) and manages the bulk of the South African Government Employee Pension Fund’s money. Barclays Africa rose 0.1 percent to 141.23 rand by 1:49 p.m. in Johannesburg, valuing a 50.1 percent stake at about 60 billion rand.

Barclays may opt for another accelerated book build to sell shares in the South African unit, three people with knowledge of the matter said on May 18. The first such sale, concluded on May 5, was oversubscribed and the buyers of the 12.2 percent on offer were made up of South African and international fund managers.

Book builds, which involve a fast, controlled share sale with little marketing, face fewer regulatory hurdles than selling to a single buyer. Barclays is currently restricted from setting up a book build because of a 90-day lock-up period.

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