Banking

Barclays makes Absa sale official

Staff Writer

 ·23 Feb 2017

The Barclays group has submitted an application to the South African Reserve Bank (Sarb) to reduce its shareholding in Absa to below 50%, the company said in a shareholder statement on Thursday.

“Shareholders are advised that Barclays has submitted an application to the South African Reserve Bank for approval to reduce its shareholding in the Group (Barclays Africa) to below 50%,” Barclays Africa said.

“The application, which also requires the approval of the Minister of Finance, based on the advice from the Registrar of Banks, includes the terms of the separation payments and transitional services arrangements, which have been agreed between Barclays and BAGL (Barclays Africa Group Limited),” the bank said.

Barclays currently holds a 62.3% stake in Barclays Africa Group (Absa).

The agreed terms provide for contributions by Barclays to Absa totaling £765 million (ZAR12.8 billion), primarily in recognition of the investments required for the group to separate from Barclays.

These contributions, comprise:

• £515 million (R8.6 billion) in recognition of the investments required in
  technology, rebranding and other separation projects;

• £55 million (R0.9 billion) to cover separation related expenses, of which £27.5 million was received in December 2016; and

• £195 million (R3.3 billion) to terminate the existing service level
  agreement between Barclays and Absa, relating to the Rest of Africa operations
  acquired in 2013.

As part of the agreed terms, from the date on which Barclays PLC reduces its shareholding in Absa to below 50%:

• Absa can continue to use the Barclays brand in the rest of Africa for three years; and

• Absa will receive certain services from Barclays on an arms’ length basis for a
  transitional period, typically up to three years.

The group also noted that separation process is expected to have an impact Barclays Africa’s financial statements for the next few years, by increasing the capital base in the near-term and generating endowment revenue thereon, with increased costs.

“Consequently, Absa will start to report normalised results that better reflect the underlying performance of the Group once the contributions have been received,” said the group.

Read: It’s official: Absa won’t face punishment for rand price-fixing