Shortage of cash-flush black investors? BEE delays Barclays Africa sale to PIC

South Africa’s largest money manager, the state’s Public Investment Corporation (PIC), highlighted its policy of increasingly favouring black suppliers and partners in its annual report this week. It’s a policy that takes precedence over many investment variables, with the PIC prepared to wait for the right black partners – ones with money – to come along before buying assets. The PIC revealed this week that it has an appetite to increase its stake in Barclays Africa. However, sources have told Bloomberg that a black consortium lined up to join the PIC in the purchase has been hampered because it has been unable to come up with sufficient funds. Uncertainty around how Barclays will dispose of its stake has dragged South Africa’s banks index down. The PIC favours South African investors, though CEO Dan Matjila says it is also prepared to work with an international investor who “backs South Africans”. – Jackie Cameron

By Renee Bonorchis and Janice Kew

Public Investment Corp., Africa’s largest money manager, said it’s interested in boosting its holding in Barclays Africa Group Ltd. and is still considering the best partner to team up with for a bid.

PIC chief executive officer Dan Matjila
PIC chief executive officer Dan Matjila

“There is appetite from our side to increase our stake,” Dan Matjila, chief executive officer of the PIC, said in an interview in Pretoria on Tuesday. “We’re still assessing which is the best partner to go with and the best partner with cash,” he said, adding that the ideal co-investors would be South African, or if international, a partner who backs South Africans.

Plans by PIC to form a consortium of black shareholders to buy a stake have been hindered because they’re struggling to raise finance, people familiar with the matter said last month. While earlier this year PIC faced competition for the shares, U.S. private-equity company Carlyle Group LP has now withdrawn from bidding with Bob Diamond’s Atlas Merchant Capital LLC, the former Barclays Plc CEO said last month. Abraaj Group is also no longer in talks for the business either, people familiar with the matter said.

Diamond, who in April said he was working with investors on a potential purchase with Carlyle, wouldn’t be drawn on whether his bid was ongoing in an interview with Bloomberg Radio in New York last month. The PIC had preliminary meetings with companies tied to Diamond earlier this year.

“Talks with Bob Diamond ended a while ago,” Matjila said.

‘Need Permission’

PIC, which holds about 6.4 percent of Barclays Africa on behalf of South African government employees, has seen a lot of interest in getting together a group of investors to buy shares in the Johannesburg-based lender, Matjila said. Barclays plans to reduce its 50.1 percent holding in South Africa’s third-largest bank to 20 percent or less in order to comply with regulations and boost capital levels.

A women uses an ATM at a branch of Barclay's South African subsidiary Absa bank in Johannesburg, South Africa March 6, 2016. Picture taken March 6, 2016. REUTERS/Siphiwe Sibeko
A women uses an ATM at a branch of Barclay’s South African subsidiary Absa bank in Johannesburg, South Africa March 6, 2016. Picture taken March 6, 2016. REUTERS/Siphiwe Sibeko

London-based Barclays sold more than 12 percent in its African unit to investors including PIC in May though an accelerated bookbuild. “If there was an accelerated bookbuild we may have to hold a significant amount as a result of our structure and the benchmarks we are expected to track,” Matjila said. “We would need permission if our holding were to go more than 20 percent.”

PIC, which manages more than 1.85 trillion rand ($136 billion) in assets, wouldn’t necessarily buy shares just to create a black-investment shareholding in Barclays Africa, but if it did end up with an excess of stock, it could sell these securities to black investors, Matjila said.

“Whether there is a bookbuild, it’s in Barclays’ hands,” he said. “They would have to tell us.”

Read also: Barclays Africa returning to nationalistic roots as Black SA control nears

Overhang Fears

Barclays Africa led South Africa’s six-member banks index lower on Wednesday. The stock fell as much as 2.6 percent and was trading 1.4 percent down at 153.25 rand as of 10:01 a.m. in Johannesburg. The FTSE/JSE Africa Banks Index has climbed 16 percent this year, while Barclays Africa has lagged, gaining 7.1 percent.

The shares are being weighed down by worries of an “overhang” that may occur depending on how Barclays disposes of its stake, said Patrice Rassou, head of equities at Sanlam Investment Management in Cape Town. Concerns are maybe more acute because of the pressure European banks have been under following speculation about Deutsche Bank AG’s capital levels in the wake of a $14 billion claim from the U.S. Justice Department, he said.