Absa plans R9.6 billion deal to increase black ownership

Absa is considering a new Black Economic Empowerment plan that could constitute as much as 8% of South Africa’s third-largest lender, worth about R9.6 billion at current prices.

The program is likely to be inclusive of both external investors and staff, the Johannesburg-based bank said in a statement on Wednesday (22 September). The terms will be announced later in the year and the plan is expected to be implemented in 2022.

South African companies are encouraged to adopt black empowerment plans to comply with government policies to redress financial inequality stemming from the apartheid era. Absa’s existing trust owns a stake of about 1.9% in the lender.

Absa had looked at setting up a new program following the exit of former shareholder Barclays, but put the matter on hold when the coronavirus pandemic started to roil markets 18 months ago.

The shares rose 1.4% in early trade in Johannesburg, extending gains for the year to 19% and valuing the bank at R121 billion.

“The planned transaction is a demonstration of our commitment to transformation and cements our longstanding view and approach of creating inclusive growth in Africa.

“While it is aligned with the South African government’s B-BBEE objectives and with the commitments contained in the Financial Sector Code, we will also extend the offer to include employees across our operating markets,” said Jason Quinn, Absa interim group chief executive.

While the transaction is in development, it is currently envisaged that the scheme will hold up to 8% of the group’s issued share capital, which equates to approximately R9.4 billion, based on the group’s share price on 20 September 2021, and that it will be broad-based, including third-party investors and staff.

The staff component will enable all Absa employees across the group’s operations to become shareholders and to participate in the group’s growth, it said.

In 2004, Absa became the first of the large banks in South Africa to conclude a significant B-BBEE transaction, issuing a 10% stake to Batho Bonke Capital.

The Batho Bonke empowerment consortium consequently became the second-largest shareholder in Absa. As the Batho Bonke transaction unwound, allowing beneficiaries to sell their shares, South Africans, from community trusts to women’s groups, BEE companies, stokvels and employees, benefited.

With further reporting by Bloomberg.

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