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Author: Jeanette Clark|

06 December 2012 08:34

Barclays and Absa to combine most Africa operations

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Absa Group Limited’s name will change to Barclays’ Africa Group Limited.

PRETORIA – Absa CEO Maria Ramos emphasised that the intention with the proposed deal to combine most of the Africa operations of Barclays Bank PLC and Absa Group Limited is not to cut jobs. In a conference call with the media she said that the transaction was about maximizing growth opportunities and to ensure a “focused, efficient organization.”

Pending shareholder approval and regulatory approvals, by the middle of next year Absa Group Limited (JSE:ASA) and most of Barclays Bank PLC’s Africa operations will have become one entity and Absa Group’s name would have changed to Barclays Africa Group Limited. The reason for the name change is given in a joint statement by the two banks as to “reflect the enlarged portfolio and pan-African scope of the business.”

The proposed transaction, where Absa will acquire a portfolio of most of Barclays’ African operations by transferring R18.33bn’s worth of Absa shares to Barclays in exchange for 100% of the shares in the holding company of the portfolio, will push Barclays’ stake in Absa from the current 55.5% to 62.3%. The board of the current Absa Group Limited will also be “reconstituted” to reflect the new acquisitions.

“Bringing together Barclays Africa with Absa is an important step in furthering our ‘One Bank in Africa’ strategy and the goal to become the ‘go-to’ bank across the continent. This transaction will give us a platform from which we can further grow our Africa business to the benefit of customers, colleagues, shareholders and the communities in which we operate,” Barclays Chief Executive Antony Jenkins said in a joint statement by the banks.

By noon Absa’s share price had strengthened by 4.77% to R148.46. This is already significantly higher than the 52-week low of R133.30 in September.

In the statement released on Thursday morning, the two banks indicate that the combination will happen by way of an acquisition by Absa of Barclays Africa Limited, which will be the proposed holding company of a portfolio of Barclays Africa assets that will form part of the deal. The proposed cost of the transaction will be R18.33bn (based on a price of R141.50 per Absa share and the current issued share capital of Absa) or 129 540 636 Absa ordinary shares.

For the time being it seems as if the Absa brand will still remain in South Africa, with Ramos stating on the conference call that the brand will be used in South Africa for retail and card businesses. She said Absa was excited about the announcement and that it was “compelling and unique.” Through the transaction the two banks will be creating the largest bank in Africa by customers. After the transaction the combined JSE-listed business will serve approximately 14.4 million customers through a network of more than 1 300 outlets and over 10 400 ATMs, employing more than 43 000 people across ten countries, which represent approximately 22.5% and 30.5% of Africa’s population and GDP respectively.

The portfolio that will be acquired by Absa will include ownership interests in banking operations in Botswana (67.8%), Ghana (100%), Kenya (68.5%), Mauritius (100%), Seychelles (99.8%), Tanzania (100%), Uganda (100%) and Zambia (100%), as well as the Barclays Africa Regional Office in Johannesburg (100%). Not included in the transaction are the Barclays operations in Egypt and Zimbabwe. Absa will continue to own 100% of Absa Bank Limited, 95.8% of Barclays Bank of Mozambique and 55% of the National Bank of Commerce in Tanzania. (See table below with information on the above operations)

With regard to management, the statement emphasised that each business within the portfolio is led by an experienced management team and board of directors in the specific country.

Although shareholder and regulatory approval still needs to be obtained, the proposed transaction has been unanimously approved by the independent directors of the Absa Board and a fairness opinion has been provided.

For the deal to go ahead the operations of at least Botswana, Ghana, Kenya and Mauritius (labeled the First Closing Target Companies and accounting for approximately 80% of the full portfolio) should be transferred into the holding company Barclays Africa Limited by June 6 2013 and Absa would then acquire 100% shareholding in the holding company by transferring the equivalent of the value of the above target companies. The rest of the consideration shares will be transferred into a trust and will later be transferred to Barclays once all the operations in the portfolio have been moved to the holding company.

In 2011, Absa and Barclays started with a process of integrating their African businesses. This initially involved combining the regional offices for Absa Africa and Barclays Africa in Johannesburg and putting an African management oversight team in place. It also included introducing a global product strategy across the continent. As rationale for the further proposed combination the banks’ say that it is an important step in becoming the go-to bank in Africa. Further reasons given include that it will:

  • accelerate plans to expand corporate banking, market activities and bancassurance in Africa,
  • create the largest bank in Africa by number of branches (with a network of more than 1 300 outlets across ten countries),
  • “unlock access to pan-African growth for Absa shareholders through exposure to a sub-Saharan African financial services group across eight countries,”
  • provide benefits to the individual African operations through leveraging strong product capabilities across the expanded group, as well as facilitating the sharing of expertise and development of skills across the businesses;
  • diversify Absa’s earnings on a geographic basis;
  • lead to enhanced business opportunities, improved offerings to customers, exciting career opportunities for employees and long-term value for stakeholders.

Barclays indicated on the conference call that the banks have been dealing with the relevant regulatory authorities for approximately the last six months and that good progress has been made.

A circular will be posted to shareholders on or about December 14 and a general meeting with shareholders of Absa is scheduled for February 25 next year.

The portfolio (taken from Barclays.com website)

The portfolio (taken from Barclays.com website)

Company

History and Reach

Barclays shareholding – will be transferred to Barclays Africa Limited

Barclays Tanzania

Barclays Bank Tanzania Limited first opened its doors in Tanzania in 1925 and continued to operate in the country until 1967 when its Tanzania operations were nationalized to become National Bank of Commerce. With the liberalization of the economy in 1990s, Barclays Bank PLC made a decision to re-enter the Tanzania market and re-opened its doors in the year 2000. Barclays Bank Tanzania now has 22 branches, 41 ATMs strategically located countrywide, over 400 employees and over 110,000 customers.

100%

Barclays Ghana

Barclays has operated in Ghana for ninety-five years. It is a wholly owned subsidiary of Barclays Bank PLC. Barclays Bank of Ghana Limited has an extensive retail and corporate banking network in the country, comprising 59 branches, 7 agencies, 10 Premier Life Centres, 2 Premier suites and 8 Local Business Centres. Barclays has 135 ATMs spread across 90 locations nationwide.

100%

Barclays Botswana

Barclays Bank PLC commenced operations in Botswana 60 years ago when an agency was opened in Lobatse in 1950. By independence in 1966, four full branches had been opened and a network of agencies, serving major villages was being developed. In 1975, the Bank was incorporated locally.

Until May 1986, it operated as an autonomous, wholly- owned subsidiary of Barclays Bank PLC and was managed from its head office in Gaborone. In 1986, ordinary shares in the Bank were issued to employees of the Bank, Botswana citizens and locally incorporated corporate bodies. The effect of this issue was a reduction in the Barclays Bank PLC shareholding to 89.8%. Following a further rights issue to Botswana citizens in 1987, the Barclays Bank PLC shareholding was reduced to 80.4%. A subsequent rights issue in 1991 diluted this shareholding to 74.86%. Today, Barclays PLC remains the majority shareholder in BBB. Barclays is the leading bank in Botswana, with a market capitalisation of over P6 billion, and offers retail banking, commercial banking and credit cards. Employing over 1,400 people, Barclays Bank of Botswana services customers across the country through a network of 101 ATMs and 52 outlets; the most extensive of bank networks in Botswana. With a presence in areas where no other bank operates, Barclays has shown commitment to provide banking services to the previously unbanked, further developing the financial services landscape in the country.

67.8%

Barclays Kenya

Barclays has operated in Kenya for over 90 years. Barclays has established an extensive network of 117 outlets with over 230 ATMs spread across the country.

68.5%

Barclays Zambia

Barclays has operated in Zambia for close to 100 years. The Bank is currently represented by 70 offices comprising of full branches and Sales Centre throughout the country. It has a staff complement of about 1204.

100%

Barclays Seychelles

Barclays established operations in Seychelles’ capital, Victoria, in 1959 and today has the largest banking office and cash machine network in the country (thirteen ATMs and six branches), with representation on the three main islands of Mahe, Praslin and La Digue (one agency).

99.8%

Barclays Mauritius

Barclays’ presence in Mauritius dates back to 1919 and operates as a branch of Barclays Bank PLC

100%

Barclays Uganda

Barclays Bank (Dominion, Colonial & Overseas) opened the first branches, at Jinja and Kampala, on 1st August 1927. In 2007, Barclays acquired Nile Bank and expanded its footprint from 7 branches to the current 51 and 75 ATMs.

100%

Topics: Absa, Barclays
Who's Who
JOURNO PROFILE

NAME:  Jeanette Clark
BIO: Moneyweb's Pretoria correspondent.
EMAIL:  jeanette@moneyweb.co.za

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