Barclays, which is the majority owner of Absa, will raise its stake in South Africa’s third-largest bank to 62.3 percent from 55.5 percent as part of a Sh103.1 billion deal first outlined in August.
The proposed transaction will see Absa acquire a portfolio of most of Barclays’ African operations by transferring Sh146.1 billion worth of Absa shares to Barclays in exchange for 100 percent of the shares in the holding company of the portfolio.
CEO of Absa, Maria Ramos, said that they are excited by the opportunities for growth across the continent and the geographically diversified earnings potential that a combined business will deliver.
“It will accelerate plans to expand corporate banking, market activities and bankassurance in Africa. It is also expected to provide benefits to the individual Barclays Africa operations, through leveraging strong product capabilities across expanded operations,” she explained.
“It’s also expected to facilitate sharing and expertise, while further developing skills within the Barclays Africa portfolio,” she added.
In the past, Absa was barred from expanding into Africa as its parent company, Barclays, was already operating in the region, causing it to lose some lucrative markets to bigger rivals.
Absa will be renamed Barclays Africa Group Ltd but will retain the Absa brand for its retail and card business in South Africa once the transaction is completed.
This is the first significant strategic move since Antony Jenkins replaced Bob Diamond as Barclays’ chief executive.
Jenkins said that the partnership, which will be finalised during the first half of 2013, will give the bank a platform from which they can further grow their Africa business to the benefit of customers, colleagues, shareholders and the communities in which they operate.
“This is a very significant step in furthering our ‘One Bank in Africa’ strategy. Africa represents a significant opportunity for the Barclays Group,” he said.
“African economies have exhibited strong growth in the past decade supported by economic reforms. Furthermore, Africa remains under banked relative to developed markets and many emerging markets,” he explained.
Through the transaction, the two institutions will be creating the largest bank in Africa by customers.
Following the transaction the combined JSE-listed business will serve approximately 14.4 million customers through a network of more than 1,300 outlets and over 10,400 ATMs, employing more than 43,000 people across 10 countries, which represent approximately 22.5 percent and 30.5 percent of Africa’s population and GDP respectively.
The portfolio that will be acquired by Absa will include ownership interests in banking operations in Botswana (67.8 percent),Ghana (100 percent), Kenya (68.5 percent),Mauritius (100 percent), Seychelles (99.8 percent), Tanzania (100 percent), Uganda(100 percent) and Zambia (100 percent), as well as the Barclays Africa Regional Office inJohannesburg (100 percent).
Absa will continue to own 100 percent of Absa Bank Limited, 95.8 percent of Barclays Bank of Mozambique and 55 percent of the National Bank of Commerce in Tanzania.
However, the bank’s operations in Egypt and Zimbabwe will not form part of the transaction, which will have to be approved by Absa’s shareholders and regulatory authorities.
Barclays paid Sh387.7 billion for a majority stake in Absa in 2005 and the two have been integrating their operations since 2011, after Barclays decided to move its Africa headquarters back to Johannesburg from Dubai.
Barclays first presented the idea of selling its African assets to Absa when it acquired the lender in 2005, but the pair couldn’t agree on the price.
Ramos emphasised that the transaction will not lead to job cuts, though she confirmed that there will be board changes at the South African bank.
“We’ve already done over the last year and a half a lot of work on pulling our operations together. We are not doing this to cut jobs,” she said.
She added that the partnership will unlock access to pan-African growth for Absa shareholders through exposure to a sub-Saharan African financial services group that is present in eight countries.
“The proposed transaction makes sense as the next step in this integration journey. The consolidated ownership structure will align the oversight and strategic direction of African businesses,” she noted.
“It will also ensure that we can pursue a common strategy for growth and expansion,” she added.