Absa and Barclays both appear confident that they will get the necessary shareholder support for Barclays to acquire the 60% stake it is seeking in the South African bank.
Absa shareholders on Monday voted overwhelmingly in favour of a scheme proposed by United Kingdom banking group Barclays to acquire 32% of all Absa ordinary shares and in addition waived the requirement for Barclays to make a mandatory offer for all of Absa’s shares.
These were pre-conditions to the scheme and partial offer becoming effective.
The Absa board’s recommendation to shareholders of the scheme of arrangement proposed by Barclays was accepted by shareholders representing 99,01% of the votes exercised by shareholders present in person or by proxy.
Barclays requires the support of a minimum of shareholders votes representing 75% of shareholders, present in person or by proxy at the scheme meeting to take the process to the next step — the court hearing to sanction the scheme of arrangement, subject to all other conditions being fulfilled.
A successful outcome at the court hearing will result in the scheme becoming unconditional, requiring all Absa ordinary shareholders to dispose of 32% of their Absa shares to Barclays.
The scheme of arrangement is the first part of the proposed acquisition, by Barclays of a 60% interest in Absa. The second part is the partial offer to all ordinary shareholders to acquire an additional 28% of their shares. Barclays is offering R82,50 per share, payable in cash, representing a total consideration for the scheme and partial offer of R33-billion.
Shareholders also agreed to waive the requirement under the South African Takeover Code to make a mandatory offer to all shareholders for all of their Absa shares. This resolution, which requires the support of a majority of independent shareholders, present in person or by proxy, was passed by a majority of more than 94%.
The scheme and the offer are interconditional. At present Barclays holds shares and has received tenders and commitments to tender which, when aggregated with shares to be acquired under the scheme, will amount to 51% of all Absa ordinary shares.
In order for the scheme and the offer to become effective, Barclays requires shareholders to tender such number of shares through the partial offer that Barclays will hold at minimum 56,5% of all Absa ordinary shares.
If the 56,5% acceptance condition has not been fulfilled by the date of the court hearing to sanction the scheme, currently scheduled for June 21, Absa and Barclays may seek to postpone the hearing to allow for its fulfillment. Any postponement will be for as short a period as possible and will be subject to the court’s confirmation.
Absa group chairperson, Danie Cronjé, believes that the transaction has received the overwhelming support from Absa shareholders because it ensures all shareholders will participate equally in an attractive deal: “In the interests of treating all shareholders equally, the structure of the scheme of arrangement has been designed to ensure a satisfactory level of participation by all Absa’s ordinary shareholders, while at the same time enabling those shareholders who wish to participate to a greater extent to do so.
“All shareholders stand to benefit from this deal. Firstly, they will receive a good price for the shares they tender in response to the Barclays offer, and secondly they can retain a holding in Absa and share in the expected future upside”
The R33-billion deal is South Africa’s single largest foreign direct investment to date, providing a boost to the economy and demonstrating a strong vote of confidence in the country.
David Robert, chief executive of Barclays International Retail and Commercial Banking said: “Shareholder support for this transaction moves us a step closer to the creation of a powerful combined business.
“We believe that the alignment between Barclays and Absa’s values — focus on the consumer and on performing for shareholders — will allow us to create competitive advantage and real value for all stakeholders, including the wider community in South Africa”.
“We look forward, once the deal completes, to working with our counterparts in Absa to deliver the synergies which have been identified and to beginning the process of bringing the best of Barclays and Absa to bear on customers’ behalf”.
Absa Group chief executive Dr Steve Booysen is looking forward to completing the transaction.
“These are very exciting times for Absa, Barclays and South Africa, because the transaction will help Absa accelerate the achievement of its strategic intent, namely to building the leading financial services business in South Africa and ultimately the pre-eminent bank on the African continent.
“This transaction is based on sound business practices and embraces the principle of growth, for Absa, Barclays, our employees and customers. The fit between the organisations is good and we share standards of excellence that have made both organisations successful. After the deal completes, I look forward to working with my new Barclays colleagues.” ‒ I-Net Bridge