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Barclays’ African dreams shattered on need to improve capital adequacy

Barclays’ African dreams shattered on need to improve capital adequacy

Barclays plc, the London listed parent of Barclays Africa Group Ltd surprised investors on Thursday 01 June by placing more shares than was originally announced.

“Further to the announcement released on 31 May 2017, due to strong investor demand, Barclays has decided to increase the size of the Placing. Accordingly, pursuant to the Placing, Barclays has agreed to sell 285,691,979 ordinary shares in the capital of Barclays Africa Group Limited (representing 33.7% of BAGL’s issued share capital) at a price of ZAR 132.0 per share, raising aggregate gross sale proceeds of approximately ZAR 37,711 million (£2,224 million)” Barclays stated early on Thursday morning to explain the increased number of shares it is willing to relinquish.

In an official statement released a day earlier, on Wednesday this week, it was still Barclays’ intention to place only 187 million shares, or roughly 22% of the shareholding in Barclays Africa.

After completion of the sale, Barclays plc will retain 139 million shares in Barclays Africa, translating to an effective 16.4% shareholding. However, Barclays indicated that 12.7 million ordinary shares will go to a South African BEE group, leaving the British bank with only 15% shareholding in Barclays Africa. The sale will help Barclays plc improve its capital adequacy ratio for which it was placed on watch earlier by the Bank of England.

Earlier in the week, the South African press speculated that the BEE placement will go to the South African Public Investment Corporation. The corporation’s Managing Director, Dr Daniel Matjila recently spoke at an investors conference in Windhoek where he emphasised the importance of securities in the Corporation’s extensive portfolio running into trillions of Rand. In their Thursday statement, Barclays said the BEE group still has to be established.

However, Barclays did indicate that the Public Investment Corporation will play a substantial role as anchor investor which analyst deemed to be a sign that the Corporation will aquire a major stake in the primary placement and that another BEE entity will be involved in the acquisition of the stated 12.7 million shares.

“As previously announced, the Public Investment Corporation SOC Limited has agreed to be an anchor investor in the Placing, however it requires certain regulatory approvals before it can take up its allocation of the Placing Shares. Delivery in respect of the Placing Shares to be taken up by PIC is expected to occur at a later date following receipt of the necessary regulatory approvals” Barclays plc stated adding that the 286 million Placing Shares figure includes the shares to be taken up by the Public Investment Corporation SOC Limited.

Barclays Africa Group operates in 11 African countries including Seychelles and Mauritius but excluding South Africa according to information put out in 2014 by Absa Bank. It operates 609 trading points in these countries. In South Africa Absa Bank, the largest entity in Barclays Africa operates 1007 trading points indicating its relative strength compared to the whole rest-of-Africa business of Barclays Africa Group.

In Namibia, Absa Bank downscaled its local presence following an abortive attempt to obtain control shareholding in Bank Windhoek. A single office was manned in Windhoek near Ausspannplatz until it was eventually closed down in 2014. But there were still several thousand Absa credit card holders in Namibia, according to information provided by the Windhoek office shortly before it was finally shut down.

In a move that implies unbundling, media in Zimbabwe reported on Wednesday that Barclays plc has sold its majority stake in Barclays Bank Zimbabwe to First Merchant Bank in Malawi.

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