LONDON – 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, says a person familiar with the situation. Though current Barclays chief executive Jes Staley wants to sell down the bank’s 62.3% 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 Limited, 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.
Given Atlas Mara might be less interested in South Africa, which accounted for 84% 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%, 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.