Barclays drops Absa stake to 50.1%; will soon offload control to new owner

The Barclays Plc share price, stagnant for seven years, is bound to start getting some life after today’s news the UK bank has taken a concrete step to sell off its African assets, 85% of which are housed in South African bank Absa. The first 103m shares in JSE-listed Barclays Africa, worth a hefty £600m (R13bn) are being offered to institutional investors through an accelerated book build. South Africa’s public sector retirement fund has agreed to anchor the offer by acquiring up to a tenth of this stock, taking its total stake in Barclays Africa to over 7%. The book build will leave 50.1% in the UK bank’s hands – a controlling stake it intends offloading to a single acquirer, a number of whom are circling. Which tells us Absa is likely to have a new owner a lot sooner than most had imagined. So far, however, former Barclays CEO Bob Diamond and his Atlas Mara/Carlyle consortium is the only interested buyer to have broken cover. – Alec Hogg    

By Stephen Morris

(Bloomberg) — Barclays Plc is selling about one-fifth of its stake in Barclays Africa Group Ltd. as Chief Executive Officer Jes Staley accelerates his overhaul of the British bank.

The Public Investment Corp., Africa’s biggest money manager, will be a major investor in the placement of 103.6 million shares, or 12 percent of issued stock, London-based Barclays said Wednesday in a filing. PIC will buy as much as 1.2 percent of the total shares, according to the statement, adding to the 5.3 percent it already owns.

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
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

“This is an important first stage of our sell-down and keeps open both strategic and capital markets options for the remainder of our 50.1 percent shareholding,” the bank said in an e-mailed statement. “We have had interest from numerous potential investors.”

Staley, 59, announced on March 1 the bank was retreating from Africa with other measures to raise cash, shrink globally and lighten its capital burden. One of the interested parties circling is former Barclays CEO Bob Diamond, who is readying a bid via a consortium of investors including U.S. private-equity giant Carlyle Group LP, seeking to combine the business with his African-banking company Atlas Mara Ltd.

Regulatory Hurdle

The decision to sell Africa hasn’t rallied the shares, which still trade at about half the bank’s book value, driven in part by a decision to cut the dividend for the next two years to conserve funds. The stock fell 1.4 percent in London to 162.45 pence at the market close.

The U.K. lender owns about 62 percent of Barclays Africa and has said it plans to reduce its ownership to less than 20 percent, at which point it can deconsolidate the business and direct the capital to other units.

Read also: Barclays sale of Absa: An abject lesson in the cost of overpaying – and not

Staley said in a March 10 interview that while he’d like to maintain a stake in the African business, he’d consider an offer for the bank’s entire holding. The South African central bank said today it will “look quite negatively” on a private-equity buyout for the country’s third-largest lender, especially if any deal involved leverage and exit strategies. Regulators prefer long-term commitments from shareholders with deep pockets, the central bank said.

Under present rules, an investor seeking to buy more than 15 percent of a South African lender needs approval from the Reserve Bank, while the purchase of a controlling stake will need the consent of the finance ministry.

Barclays bought South African bank Absa in 2005 and then built it up under former CEOs John Varley and Diamond, eventually acquiring its parent’s operations in eight African nations, giving Barclays a presence in 12 countries on the continent with 12 million customers.

Barclays’s own investment bankers are leading the accelerated bookbuild, which starts immediately, assisted by JPMorgan Chase & Co., Citigroup Inc. and UBS Group AG, according to the statement.

By Tiisetso Motsoeneng

JOHANNESBURG, May 4 (Reuters) – Barclays Plc said on Wednesday it is selling shares representing 12 percent of Barclays Africa Group and that South Africa’s state pension fund would be an anchor investor.

Barclays Plc is selling down its 62 percent stake, which is worth some $5 billion, in Barclays Africa Group (BAG) under a plan by new Chief Executive Jes Staley to simplify the bank’s structure and generate higher shareholder returns.

Read also: Why Barclays is selling Absa: Under-performance in £s only half the story

Barclays said in a statement it would sell 103.6 million shares in BAG, with up to 10.3 million shares going to South African state pension fund Public Investment Corporation (PIC), representing up to 1.2 percent of BAG.

“This is an important first step as we seek to reduce our shareholding in Barclays Africa to a level that achieves accounting and regulatory deconsolidation,” Staley said in a statement.

PIC, Africa’s largest fund manager with more than $122 billion of South African government employee pension assets under its custody, is already the second-biggest shareholder in BAG with a holding of about 6 percent.

Earlier on Wednesday, a source with direct knowledge of the matter told Reuters in Johannesburg that talks were taking place between PIC and Barclays about the fund buying some of the Barclays holding.

Read also: Barclays’ staggered retreat – to sell down, seek minority stake in Africa

“There are discussions going on about the PIC increasing its stake in Barclays Africa,” the source said, declining to be named because the matter is private. “There’s no PIC-led consortium. It’s just the PIC,”

The PIC is the second investor to show interest in BAG, which runs South Africa’s biggest retail bank, after a source told Reuters last month that Atlas Mara has teamed up with private equity group Carlyle to prepare a bid.

However, any deal involving a private equity player could face regulatory opposition from South Africa’s central bank.

“As a regulator, we would not be comfortable with private equity play for any of the banks,” deputy governor Kuben Naidoo said at a press conference in Pretoria on Tuesday. He did not comment on any specific bank.

Valued at $330 million, Atlas Mara was set up by former Barclays Chief Executive Bob Diamond, who has confirmed that his firm has already lined up funding for an offer, without elaborating on what form the financing would take.

From Barclays Africa: 

·         The trade priced at a discount of 6.5%, which in line with SA precedents despite being one of the largest trades to have been executed in the SA market and despite weak SA and global markets

·         Book was multiple times covered at the clearing price of R126 with very high quality demand from institutions in SA and globally

·         We even had a core anchor investor in the form of PIC for the maximum they could take this time without seeking further regulatory approvals to increase their holding, which they can do so for any future participation if they so choose to do so

·         To get this quality of demand and discount in line with precedent in such a weak market tells you that there is a lot of positive focus on this asset globally and reflects the strong operational performance and returns of this asset

·         There are a lot of future options to include both strategic and capital markets. The fact that the interest was so high gives optionality.