Two important facts got lost in the dust kicked up around the Barclays decision to sell Absa and its other African assets. One is that the plan is actually to drop Barclays’s shareholding to under 20%, which is clearly a disinvestment despite the positive hue spin doctors are trying to put on it. Dropping its stake from the current 62.3% to under 20% means the British will be selling at least 360m Barclays Africa shares, currently worth R50bn. That’s a lot of stock. Indeed, at the JSE’s current daily turnover volumes it would take three full months of exclusively Barclays selling to achieve the objective. Little wonder Barclays is giving itself “two to three years”. Dripping the stock into the market will be a tortuous process. The second fact is that because there are so few potential buyers, some who otherwise could not set foot on Canary Wharf are actually being courted. Needs must. So disgraced former Barclays CEO Bob Diamond is suddenly every City of London analyst’s tip to buy at least the non-SA assets which account for a 16% sliver of Barclays Africa’s profits. Not everyone believes that would be a good idea. – Alec Hogg
By Dominic Elliott
LONDON, March 4 (Reuters Breakingviews) – A deal with Bob Diamond could be hard for Barclays to handle. The former boss of the UK bank, ousted by regulators for his stewardship during the Libor scandal, has previously talked to a sovereign wealth fund about taking a stake in Barclays Africa Group Ltd, says a person familiar with the situation. Though current Barclays Chief Executive Jes Staley wants to sell down the bank’s 62.3 percent stake in the Johannesburg-listed entity, he should proceed with caution.
Diamond’s master plan for Africa would probably benefit from snapping up Barclays’ stake. Through his Atlas Mara funding vehicle, Diamond is already in seven countries in sub-Saharan Africa and has aspirations to be in up to 15. Publicly-traded Barclays Africa Group Ltd, or BAGL, has majority ownership of banks in several countries that Atlas Mara might covet, including Kenya, Ghana and Uganda.
The catch is that a substantial fundraising would probably be needed to realise that dream. Based on its current share price, a majority stake in BAGL would be worth about $4 billion. Yet Atlas Mara’s market capitalisation is just $330 million, and its share price has fallen two-thirds since it listed at the end of 2013. That has been amid a wider sell-off in emerging market assets, but it’s hardly a great advertisement for would-be investors.
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Given Atlas Mara might be less interested in South Africa, which accounted for 84 percent of BAGL’s 2015 earnings, could a break-up be feasible? That would be a decision for BAGL’s 14-strong board, only three members of which are from the UK bank. And since the group was created in 2013 to consolidate South African bank Absa and Barclays’ other African businesses it could be hard to unpick.
Staley, meanwhile, should realise that selling out to Diamond presents too much of a risk. By setting a two to three-year timeframe for the UK bank to sell its stake down below 20 percent, Barclays’ boss has given himself some breathing room. The UK government’s repeated sell-down of small slugs of Lloyds Banking Group shares has shown such strategies work. South Africa’s equity market may be more volatile than the UK’s, but Barclays’ investors could prove even more so should Diamond be seen to be getting too good a deal on Africa.
