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Barclays Africa sale means late nights for banks breaking up

UK lender hasn’t sought permission to cut stake below 50%.

Barclays Plc sold the first slice of its controlling stake in  Barclays Africa Group Ltd. just two months after Chief Executive Officer Jes Staley laid out his strategy to boost capital. Here’s why the bank’s next move has taken much longer and some key issues the 365-year-old lender must overcome to speed up its two- to three-year timeframe for the sell down:

How difficult is it to sell the stake?

Project teams are working late nights at Barclays Africa to make sure every detail is taken into account, according to the Johannesburg-based lender. The South African Reserve Bank must ensure Barclays’s withdrawal doesn’t endanger stability across the continent, put South Africa’s currency at risk or upset transactions for Barclays Africa’s 12.5 million customers. Also at stake is the future of 41,250 employees at the company formerly known as Absa Group, more than 70% of whom are in South Africa.

What’s happening inside the banks?

The banks are negotiating a transitional services agreement to deconsolidate Barclays Africa, according to Staley. They are also figuring out how to change reporting lines within teams, maintain global distribution for investment-banking clients, which customers should get transferred to different units, how many staff are needed and where, how to change Barclays-linked e-mail addresses, how to deal with software licenses and who will do dollar-based trading for clients across Africa.

What has the uncertainty done to Barclays Africa?

Barclays Africa is the worst-performing lender on the six-member FTSE/JSE Africa Banks Index this year, having gained 12% compared with the average increase of 24%, with investors concerned about shares that still have to be sold on the market. The stock is trading at a 12-month dividend yield of 6.3%, the highest in the index.


What happens to Barclays Africa’s name?

After more than 100 years in Africa, there is a real chance that the name Barclays may disappear from the continent. “Decisions on brand are being carefully considered and will be implemented over time once they have been taken,” Barclays Africa said in an e-mailed response to questions. Absa kept its branding and red colours even after the purchase by Barclays in 2005, while the turquoise colours of Barclays was retained in the other African units.

What do Barclays’ holdings look like now?

The U.K. bank owns 50.1% of the South African lender, a stake which is valued at about R68 billion ($4.9 billion). It sold about 12% through an accelerated book build in May for R13.1 billion, where demand exceeded supply.

Who might be interested in a stake in Barclays Africa?

Dubai-based Abraaj Group and U.S. private-equity firm Carlyle Group LP were initially interested in a stake along with Bob Diamond’s Atlas Merchant Capital LLC, but withdrew after regulators made it clear it didn’t want Barclays Africa in the hands of buyout companies. While South Africa’s Public Investment Corp. is interested in boosting its 6.5% holding, it has said it hasn’t yet been able to form a consortium with enough money, and may take up more shares in another book build.

When might another book build take place?

Barclays hasn’t yet applied to the Reserve Bank to take its stake below 50.1%, the central bank said in an e-mailed response to questions. Instead, it’s working with the regulator along with Barclays Africa to ensure the process is smooth once the transaction is ready. The London-based parent, which will need to make separation payments, is working well with Barclays Africa management and is under no pressure to get the transaction done earlier, Chief Financial Officer  Tushar Morzaria said.

© 2016 Bloomberg


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