Further news on United Kingdom banking group Barclays’ proposed bid for a 60% stake in South Africa’s biggest retail bank, Absa, is likely to be forthcoming early next week, sources close to the deal intimated on Thursday.
And the news is likely to be positive, they say.
According to the sources, Absa’s board will hold a special meeting on Friday. The board has already expressed itself in favour of the deal, but is expected to discuss the issue of price and terms at Friday’s meeting.
The deal enjoys the support of Absa’s two biggest shareholders, Sanlam and Remgro, which jointly own just slightly less than 30% of Absa, but some of the bank’s other institutional holders are apparently holding out for a better price.
Barclays and Absa have discussed a price of R79 per Absa share plus a final dividend of R1,80, which some minorities have described as “miserly” — believing the price should be closer to between R80 and R85 per share.
Parties familiar with the deal, however, are divided on whether Barclays — the UK’s third-largest bank — would be prepared to raise the price. The British bank has spent much of the past week or so trying to convince minorities to accept the offer, and is on record as saying that while it is still hoping to seal the deal, it will not forsake its value criteria.
Barclays CEO John Varley told the bank’s recent annual general meeting: “There is a price beyond which we will not go.”
Analysts say that while the minorities might still be haggling over a price, they are unlikely to walk away from the deal.
“It’s just too good a deal to walk away from,” one analyst said.
Were the deal to collapse, they caution, Absa’s share price would likely plummet, which shareholders would not want to see happening. The group’s share price has risen exponentially — from about R50 a share to almost R80 a share — since news of the proposed deal first leaked out last September.
It traded at R79,20 a share on Thursday.
The deal will also be good for South Africa’s economy, analysts point out. At about R31-billion, it would be the single biggest foreign direct investment to date in the country.
News that the deal is likely to succeed has seen the rand trading back below R6 per dollar over the past two days. — I-Net Bridge