Barclays Africa to ‘determine own destiny’

Barclays Plc sells down stake in African group in SA’s largest bookbuild

Barclays Africa Group’s decision-making power is now in its own hands following the London-headquartered Barclays PLC’s (PLC) R37.7 billion sell down of its majority stake in the group.

“We now have significant opportunity to determine our own destiny and make our own decisions on what is right for a pan-African focused business,” said Maria Ramos, chief executive of Barclays Africa.

The group’s first priority is to take advantage of opportunities in its existing businesses before seeking opportunities elsewhere, she said in response to a question.

Despite expected changes to the board, analysts say the group’s Africa strategy is unlikely to change as it will be driven by the same management team. “Barclays PLC’s decision to sell down its stake was driven by its own capital limitations and not necessarily for strategic reasons,” said Renier de Bruyn, an investment analyst at Sanlam Private Wealth.

Still, the group’s board structure is expected to change. A Barclays Africa spokesperson said PLC is entitled to three seats on the board provided it retains a 20% stake in Barclays Africa. Through the bookbuild, PLC reduced its shareholding to 23.4%, and a further 7% of its stake is to be taken up by South Africa’s Public Investment Corporation (PIC) pending regulatory approval in Kenya, Mauritius and the Seychelles. Following the PIC’s regulatory approval, PLC will be entitled to only one seat on Barclays Africa’s board and none should its shareholding fall below 8%.

Ramos told reporters that PLC has not indicated any plans to sell down its stake any further and that the PIC will not have a seat on the board.

PLC and the PIC are expected to be the group’s anchor shareholders with stakes of around 15% and 14.9% respectively.

PLC sold down its stake in the group earlier than anticipated, after increasing the number of shares placed on sale overnight on May 31. It had planned to sell a 22% stake in the African unit but increased the placement due to “strong investor demand”, eventually selling 285.7 million shares equivalent to a 33.7% stake at R132 per share. Shares in the bookbuild, the largest in South African history, were multiple-times oversubscribed with over 50% going to local shareholders, allowing the group to diversify its shareholder base.

“What we saw last night in this bookbuild was the loudest vote of confidence from investors that one could wish for,” said Ramos.

She added that investors bought into the opportunities that the financial services group offers through its investments across the continent, the countries in which it operates, its management team and employees. “They saw the potential for growing returns and our responsibility now is to make sure that we can deliver on that, which is a responsibility that we take incredibly seriously.”

According to analysts, Barclays Africa’s low share price relative to its peers drove demand for the placement. “Barclays Africa has been trading on an attractive price-to-earnings ratio and dividend yield, but the large number of shares that the market knew would come on the market from the divestment of its parent depressed the share price,” said de Bruyn. He added that the overhang on the share has now been cleared as PLC has reached its targeted shareholding.

Adrian Cloete, a portfolio manager at PSG Wealth, added that demand -– especially among fund managers that use indices as a benchmark to measure performance – would also have increased as the group’s weighting in the ALSI, Top40 and SWIX indices will increase after PLC’s divestment.

Barclays Africa has three years from the date of the sell-down to rebrand itself.