South African banking group Absa on Monday renewed its cautionary notice, saying it and United Kingdom banking group Barclays have been engaged in extensive discussions regarding the terms of a possible transaction.
The parties have also had a series of meetings with large shareholders, during which the possibility of a partial offer to acquire 60% of Absa shares at a price of R79, plus a final dividend for the year ended March 31 2005, estimated at the time to be approximately R1,80, was discussed.
Barclays and Absa have also estimated that, should a transaction proceed, the combination would produce significant synergies by accelerating the strategic objectives of both parties, improving Absa’s pre-tax profits by about R1,4-billion a year four years after completion.
Implementation costs should be about R1,8-billion over the first three years.
Barclays and Absa are considering feedback from Absa shareholders and will now determine whether a transaction would receive the requisite support from shareholders on terms acceptable to Barclays, at which stage Barclays will revert to the regulatory authorities for final consideration, the cautionary notice advised.
Shareholders were advised that should an offer be made, it may or may not be at a premium to the prevailing market price.
Speculation mounted last week that an announcement on the proposed deal was likely to be forthcoming this week.
The deal has to be approved by Minister of Finance Trevor Manuel, who has had talks with the two parties and asked them to report back to him on certain matters. These are thought to include the prospect of retrenchments.
Approval of the deal at this stage seems like a foregone conclusion, according to some analysts, but what the markets will be interested in will be the size of the deal.
Absa’s price has risen exponentially since news of the proposed deal was first leaked, from about R50 a share to about R80 a share, which means that the transaction is likely to cost Barclays more than R25-billion.
However, press reports on Monday suggested that the formal offer will not materialise on Monday, since minority shareholders are believed still to be holding out for a higher price. — I-Net Bridge