Barclays Plc reached a long-term target for shrinking its stake in its African unit earlier than expected as the bank boosted the size of a share sale by more than 50%.
The London-based lender is selling 285.7 million shares of Barclays Africa Group, equal to a 33.7% stake, at R132 each, it said in a statement on Thursday. The bank previously planned to sell a 22% stake and said it boosted the size of the offering “due to strong investor demand.”
The sale will raise about R37.7 billion ($2.9 billion) and is part of plans by chief executive officer Jes Staley, 60, to reduce the lender’s presence on the continent in favor of supporting a trimmed-down investment bank focused on London and New York. The British bank, which has had a presence on the continent for more than 100 years, first bought a controlling stake in the Johannesburg-based lender in 2005 when it was still called Absa Group.
The placement accelerates Barclays’s plan to gradually sell down its stake and deconsolidate the unit from its accounts, releasing capital that can be invested elsewhere in the business. Barclays had initially paid $5.4 billion for a 60% holding. That stake increased to more than 62% in 2013 as part of a reshuffle that saw Absa take over Barclays’s operations in eight African countries.
JPMorgan upgrade
The Public Investment Corporation, South Africa’s largest money manager, will buy a 7% stake in Barclays Africa as part of the sale once it has obtained regulatory approvals, the Johannesburg-based lender said in an emailed statement. That will help cut the stake held by Barclays, which currently owns 50.1%, to 16.4%.
The British lender’s stake will drop to 15% — reaching its target level and allowing the bank to deconsolidate the unit from its capital calculations — after the completion of a transaction aimed at boosting the participation of black investors in Barclays Africa, it said.
Barclays shares jumped 2% to 214.1 pence at 8:16am in London. JPMorgan Chase & Co. analysts led by Raul Sinha upgraded their rating on Barclays shares to overweight following the larger sale, saying it narrowed the firm’s gap to peers on capital ratios and could provide the ability to boost dividends.
The securities are being sold at an almost 10% discount to Barclays Africa’s closing price on Tuesday. Barclays Africa rose 2.4% to R142.32 in Johannesburg after tumbling 4.8% on Wednesday.
Second sale
The second sale follows the disposal of a 12.2% stake to fund managers in South Africa and abroad in May 2016. The latest phase was said to have been delayed after South African President Jacob Zuma fired Finance Minister Pravin Gordhan at the end of March, replacing him with Malusi Gigaba. Gordhan had given provisional approval to a separation agreement that involves the UK lender paying its subsidiary 765 million pounds ($987 million).
Deconsolidating Barclays Africa and including the proceeds from the sale will boost Barclays’s common equity Tier 1 ratio, the key measure of capital strength, by at least 0.73 percentage point, the lender said.
The share placement is being coordinated by Barclays itself, aided by Citigroup, Deutsche Bank and UBS Group, according to the statement. Barclays can’t sell any more Barclays Africa stock for 90 days after the latest placement is settled, a provision known as a lock-up restriction.
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