Barclays - Absa deal to test
By Wendy Hall -
Barclays, the UK banking group
that is considering taking a controlling stake in local bank
Absa, will set a precedent for foreign firms buying into South
African companies with empowerment interests.
The head of legal services at the Reserve Bank’s banking
supervision department, Michael Blackbeard, said there were no
prior examples regarding the effect of a foreign takeover on
black economic empowerment partnerships.
The specific transaction between Barclays and Absa was being
“judged on its legal merits in terms of the Banks Act. The
obligations which must be fulfilled as stipulated by the
financial services charter are to be (fulfilled) between the
banks themselves,” Blackbeard said.
The Mvelaphanda-led Batho Bonke Consortium emerged in April last
year as Absa’s empowerment partner. Tokyo Sexwale, chairman of
Mvelaphanda and Batho Bonke, is also a director of Absa.
In terms of the financial services charter, Barclays will have
to retain Batho Bonke as a 10% shareholder in the company and
increase its empowerment shareholding to 25% by 2014.
According to financial services analyst Ross Jenvey of Andisa
Securities, Barclays may “attempt to gain a 60,1% stake in Absa
… to retain control after dilution”.
Whether a possible purchase by Barclays is likely to dilute
Absa’s empowerment holdings is “a factor which will be addressed
in the regulator’s report and presented to the finance minister
for consideration”, Blackbeard said.
Vuyo Jack, an analyst at Empowerdex, said charter stipulations
meant foreign ownership was unlikely to hamper empowerment
initiatives, which he said were valuable to companies forced to
comply with empowerment legislation.
Since Barclays announced in September last year that it would
make an offer for Absa, the local bank’s share price has risen
20% to well above the R70 level.
“The increase in share price means added value for empowerment
shareholders, as they see their options are in the money,” Jack
However, a banking analyst who did not wish to be named said
Absa’s shares were likely to hover near present levels until
details of the deal were clarified. “The market is waiting to
see what Barclays will be willing to pay.”
Shareholders could also benefit from an ongoing debate,
facilitated by the Barclays deal, to restructure the partnership
between Absa and Batho Bonke. According to analyst Heather Sonn
of Legae Securities, the Batho Bonke consortium’s Absa options
were “deeply in the money”.
Sonn said Barclays ’ bid would be to the advantage of Absa’s
empowerment partners, due to the fact that Barclays had “a
global debt capability which it can bring to the party in this
Empowerment transactions are currently shifting towards debt as
opposed to the equity and options model. Barclays could give
Absa access to the global credit markets and a significant debt
Barclays has yet to issue a formal offer for Absa. Barclays
would need to offer at least R20bn for a controlling stake. The
group is awaiting regulatory approval of the deal, expected to
be announced by March.
A formal application to acquire a stake in Absa was submitted to
the Registrar of Banks on December 1.
The acquisition of Absa will extend Barclays ’ retail presence
in SA. It represents the largest foreign investment in SA’s
financial services sector for decades.
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