It has been seven years
Barclays has finally struck a deal to merge its Africa
operations with Absa, the South African bank it bought in 2005.
Under the terms of the deal, Absa acquires Barclays Africa for
shares worth R18.33 billion ($2.2 billion), while
Barclays stake in Absa rises from 55.5% to 62.3%.
The combined business
will be renamed Barclays Africa Group, except for Absas
South African retail business. It will be listed on the
Johannesburg Stock Exchange and includes Barclays
operations in Botswana, Ghana, Kenya, Mauritius, Seychelles,
Tanzania, Uganda and Zambia, as well as Barclays Africas
Johannesburg regional office.
The combined group will
cover 14.4 million customers through 1,300 outlets, employing
43,000 people in 10 countries, says Barclays. The deal excludes
Egypt and Zimbabwe operations.
Market response to the
deal was broadly positive. Analysts say it ends a messy
arrangement previously in place and streamlines Barclays
ambitions to be "one bank in Africa", as the bank describes
The deal should also
allow easier expansion of pan-African corporate banking and
bancassurance, in particular. For Absa, it diversifies earnings
and provides better growth opportunities than are available in
its existing businesses in South Africa.
"The Barclays [Africa] businesses are generating about 22%
ROE," says Johann Scholtz, head of research at Afrifocus
Securities in Cape Town. "Absa is on about 13%, and through the
cycle is probably between 18% and 20%."
|Maria Ramos, group chief executive of Absa
and chief executive of Africa for Barclays
The deal has been on the
cards since Barclays acquired its initial stake in Absa. It
happened now because, since 2005, "the banking landscape in
Africa has matured significantly, as has the relationship
between Absa and Barclays Africa," explains Maria Ramos, group
chief executive of Absa and chief executive of Africa for
Ramos says the
operational alignment between the two businesses announced in
2010 "alleviated perceived combination risks". She says: "The
proposed structure allows us to leverage the significant
potential of our Africa businesses and follows on from the
steps that we took last year to combine the businesses from an
operational point of view."
Ramos says she believes
the key integration risks have already been dealt with, and
that the new structure ensures a common strategy between the
two owners for growth and expansion.
The deal excludes Egypt and
Zimbabwe, because, says Ramos: "The macroeconomic and
political situations facing Zimbabwe and Egypt make it
difficult to value those assets."