*Transaction said to be awaiting approval from finance minister
*Barclays cutting stake to free up capital for investment bank
13 May 2017, London — Barclays Plc. is weighing selling a 16 percent stake in its Africa unit on the market once it gets regulatory approval to separate from the business, according to people with knowledge of the plans.
The sale could raise as much as $1.5 billion based on the current share price of Barclays Africa Group Ltd., said the people, who asked not to be named because the matter is confidential. The stock will probably be sold via an accelerated bookbuild offering, they said. Barclays could decide to amend the size of the sale after receiving the go-ahead, the people said.
Shares in Barclays Africa reversed an earlier gain to fall 1.1 percent to the lowest level in more than three weeks on Friday, the biggest decline in the six-member FTSE/JSE Africa Banks Index. Barclays ended 0.3 percent lower in London, after sliding as much as 0.9 percent during the day. The British bank has dropped 7.9 percent this year.
Barclays is seeking to sell down its remaining 50.1 percent stake in its African business to less than 20 percent in order to deconsolidate the unit from its accounts, releasing capital that can be invested elsewhere in the business. Chief Executive Officer Jes Staley, 60, decided 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 latest phase of the sell-down was delayed after South African President Jacob Zuma on March 31 fired Finance Minister Pravin Gordhan, who had given provisional approval on a separation agreement that involves the U.K. lender paying its subsidiary 765 million pounds ($983 million), and replaced him with Malusi Gigaba, one of the people said.
The bank does not know when Gigaba will formally sign-off on the transitional arrangement, one of the people said.
“This story is speculative and wrong,” a spokesman for Barclays said. A spokesman for National Treasury couldn’t immediately comment when contacted by Bloomberg News. Barclays on Feb. 23 said it had applied for permission for its stake to drop below 50 percent from South African bank regulators and the finance ministry.
The sale was also complicated after two rating agencies cut the country’s credit rating to junk in April, causing local bank stocks to plummet, the people said. Johannesburg-based Barclays Africa fell to its lowest level since July 2016 in the week after Gordhan was fired and has a market value of 122 billion Rand ($9.1 billion).
A year ago, Barclays raised $879 million when it disposed of a 12.2 percent chunk at a discount of about 11 percent to the average share price over the prior 30 days, according to data compiled by Bloomberg. About 40 percent went to local investors including The Public Investment Corp., Africa’s biggest money manager, with the rest bought by international fund managers, people familiar with the matter said at the time.
Deconsolidating Africa will boost Barclays’s common equity Tier 1 ratio, the key measure of capital strength, by at least 0.75 percentage point from its 12.5 percent level at the end of March, the bank estimates. The company took a 884 million pound writedown on the division in the first quarter.
Barclays Africa’s stock has slid 15 percent this year, the worst performer on the country’s banks index.
*Stephen Morris & Loni Prinsloo – Bloomberg