United Kingdom banking group Barclays on Monday made its formal offer for a 60% shareholding in South African banking group Absa, offering R82,50 per Absa share. Ordinary shareholders will also receive the Absa final dividend of R2 per share.
This represents an increase over the original offer of R79 per share and a dividend of R1,80.
The offer price represents a premium of 36,4% to the closing share price on September 22 2004 — the date prior to the first cautionary announcement — and a 8,5% premium to the closing price on April 22 2005, the date prior to the most recent detailed cautionary announcement.
The offer is to be achieved through a dual mechanism — firstly, a scheme of arrangement that, if successful, will result in Barclays acquiring 32% of Absa shares; and secondly, a top-up partial offer entitling shareholders to sell up to a further 28% of their Absa shares.
The transaction has been unanimously recommended by the Absa board and has the support of management, and Barclays has received written expressions of support from key shareholders representing approximately 63% of Absa ordinary shares.
Absa said it is anticipated that the recommended acquisition will generate potential revenue and cost synergies that are expected to improve Absa’s pre-tax profits by approximately R1,4-billion a year four years after completion, after incurring implementation costs of approximately R1,8-billion over the first three years.
The deal has been given regulatory approval by the South African government, Minister of Finance Trevor Manuel said in Johannesburg on Sunday.
Barclays initially offered to buy Absa at R79 a share or R32,3-billion, but Absa’s minority share holders rejected that, demanding a share price of R82.
Barclays is Britain’s third-largest bank by assets and Absa is South Africa’s fourth largest.
In a statement, Manuel said the deal, if approved by Absa’s shareholders, would be the single biggest foreign direct investment since the dawn of South Africa’s democracy.
”It is a vote of confidence in the country’s significant political, economic and social progress,” he said.
Manuel said South Africa’s four-pillar banking system, of which Absa is a member, will remain in place.
The other banks in the structure are Standard Bank, FirstRand and Nedbank.
When asked if another foreign bank will be allowed to buy a South African bank like Barclays did, he replied: ”I think it’s important that we deal with this on a case-by-case basis.
”The only difference now is that the shareholding of Absa shifts to primarily foreign shareholders. But the four pillars remain in place. The character of Absa as a South African bank will remain in place,” he said.
Mass action
Meanwhile, Jubilee South Africa will start mass action, ”nationally and in over 60 countries”, against the bid, the debt-relief lobby group said last Thursday.
”We will oppose the bid until Barclays apologises for supporting the apartheid regime, makes reparations to those who suffered and their lawsuit against Khulumani in the United States is resolved,” said Mallet Giyose, chairperson of Jubilee SA.
The Khulumani case is being fought by more than 100 South Africans against 23 corporations, including Barclays, which they claim collaborated with the apartheid government. Members of Khulumani are seeking an official apology, admission of guilt and financial reparation.
Giyose said his organisation is prepared to meet Absa and Barclays to discuss the implementation of these demands.
”Barclays’ bid is an affront to the South African people,” Giyose said. ”During the 1970s and up until the mid-1980s, the bank was a major financier for the apartheid regime.”
Giyose said Barclays helped the former government to acquire more than $478-million-worth (about R2,8-billion) of loans from 1972 to 1978, and, between 1982 and 1984 Barclays’ loans to South Africa totalled $725-million (about R4,3-billion).
”Barclays has never apologised for this and should not re-enter South Africa’s economy without addressing its past,” Giyose said. — Sapa