Barclays offloads 7.4% stake in former African unit Absa

SOUTH AFRICA – UK-headquartered Barclays has sold a 7.4% stake in former African unit Absa for R10.5 billion (US$ 0.67bn), cutting its holding by half.

The sale was conducted through an accelerated book-build process which involves inviting investors to purchase shares usually in a short period (within 48 hours or less). Barclays will now own 63 million shares, or 7.4%, of Absa following the sale. Before the sale, Barclays held 14.9% in Absa.

Barclays had a 15% holding in the African lender before the sale. The British bank, which has had a presence in Africa for more than 100 years, has been reducing its stake in Johannesburg-based Absa in recent years. It sold off much of its controlling stake in the group – then-Barclays Africa Group – in 2017.

The placing is estimated to result in an increase of approximately 10 basis points to Barclays’ CET1 ratio – a key measure of capital strength – as of December 31, 2021.

The net proceeds from the deal will be used for the group’s general corporate purposes, Barclays said in the statement. The bank’s remaining 7.4% stake in Absa is now subject to a lock-up restriction, which applies until 60 days after settlement.

Barclays, Absa, Citigroup, Banco Santander SA and Societe Generale SA are arranging the sale.

Barclays has been offloading its shareholding in Absa since 2017 when it sold off a controlling stake in the bank, as the former wanted to scale back its exposure to international markets, including parts of Africa.

The involvement of Barclays in Absa started around 2005 when it acquired more than 49% of the bank.

At the time, Barclays viewed South Africa as an attractive market with encouraging growth prospects. Barclays also wanted to use Absa as a vehicle to build its retail, commercial and investment banking presence in selected international markets.

Old Mutual set to launch black economic empowerment share scheme

In a separate transaction in the financial services industry, Old Mutual has proposed to launch a black economic empowerment (BEE) share scheme that will boost its black ownership from 25% to 30%.

The insurance company wants to issue about 205.3 million new Old Mutual shares in the new BEE scheme. The new shares will equal about 4.36% of Old Mutual’s issued share capital.

The scheme will benefit Old Mutual employees who will, through a trust, get 78.1 million shares — or 1.66% of the insurer’s issued share capital.

All employees, regardless of race, will be allowed to participate in the scheme, but black South African employees will be allocated more shares.

Under the BEE scheme, black members of the public will be allocated 63.6 million shares, and black communities will also benefit from the share scheme.

The market will probably watch closely to see if the BEE share schemes of Absa and Old Mutual create true value and ownership for black investors. Often black investors are lured to participate in these schemes using debt, which erodes any value-creation opportunity.

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