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PIC in talks to create group to bid for Barclays Africa stake

Fund manager does not rule out partnership with Bob Diamond.

The Public Investment Corporation, Africa’s biggest fund manager, said it’s forming a group of black investors to buy a stake in Barclays Africa Group in a bid to ensure the bank comes back under the control of South Africans.

“There are discussions with institutional investors managing black money, such as pension funds,” Dan Matjila, head of the Pretoria-based PIC, said by phone on Monday. As yet it’s difficult to say how much of a stake the group may bid for because “we don’t have the check book to take it all, but we are looking at foreign partners too,” he said.

Britain’s Barclays Plc holds 50.1% of the South African bank and plans to reduce that stake to raise cash. The South African Reserve Bank has said it wants bank owners to have stability, deep pockets and long-term plans. Ex-Barclays chief executive officer Bob Diamond said in April he and investors including US private equity giant Carlyle Group are working on a potential bid. Dubai-based Abraaj Group is also planning a bid, people familiar with the matter said on May 15.

The PIC has held talks with Diamond, Matjila said, declining to comment about whether the money manager would be willing to invest alongside him. The PIC would need to determine if Diamond is a good partner should Barclays be prepared to sell the unit to him, the Financial Times reported, citing Matjila. It would be good to have offshore money supporting the transaction because of its size, he was cited by the London-based newspaper as saying. 

Permanent Structure

“We want a structure with permanent capital,” Matjila told Bloomberg News on Monday. Like South Africa’s FirstRand, which is controlled by a holding company made up of its founders, “a holding company structure works better. The cost structure works better and the holding company can then hold related businesses like insurance or asset management. That’s most desired, but requires a lot of cash,” he said.

It’s unclear whether or not the likes of Abraaj or Carlyle would be able to offer permanent capital, according to Matjila. The PIC would like the deal to happen quickly and Barclays wants to fix their regulatory issues as quickly as possible, he said adding that there have been discussions with South African billionaire Patrice Motsepe’s African Rainbow Capital, “but nothing is firmed up.”

Johan van Zyl, chief executive officer of African Rainbow Capital, declined to comment.

The PIC oversees almost R2 trillion ($128 billion) and manages the bulk of the South African Government Employee Pension Fund’s money. Barclays Africa rose 0.72% to R142.11 at the close in Johannesburg, valuing a 50.1% stake at about R60 billion.

Barclays may opt for another accelerated book build to sell shares in the South African unit, three people with knowledge of the matter said on May 18. The first such sale, concluded on May 5, was oversubscribed and the buyers of the 12.2% on offer were made up of South African and international fund managers.

Book builds, which involve a fast, controlled share sale with little marketing, face fewer regulatory hurdles than selling to a single buyer. Barclays is currently restricted from setting up a book build because of a 90-day lock-up period.

© 2016 Bloomberg

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