Johannesburg - UK banking giant Barclays Group has applied to the South African Reserve Bank (SARB) to reduce its shareholding in its Africa unit, which comprises Absa.
The move comes after Barclays announced in March 2016 that it plans to reduce its shareholding in Barclays Africa unit to “achieve accounting and regulatory deconsolidation”.
Barclays holds a 62.3% stake in Barclays Africa Group [JSE:BGA].
“Shareholders are advised that Barclays Plc has submitted an application to the South African Reserve Bank for approval to reduce its shareholding in the Group [Barclays Africa] to below 50%,” Barclays Africa said in a statement to shareholders on Thursday.
“The application, which also requires the approval of the Minister of Finance, based on the advice from the Registrar of Banks, includes the terms of the separation payments and transitional services arrangements, which have been agreed between Barclays Plc and BAGL (Barclays Africa Group Limited),” said the bank.
Barclays added that the African unit can continue to use the Barclays brand in the rest of Africa for three years; and that this unit will “receive certain services from Barclays on an arms’ length basis for a transitional period, typically up to three years”.
Outlining the separation agreement, Barclays further said:
- The agreed terms provide for contributions by Barclays to its African unit totaling R12.8bn, primarily in recognition of the investments required for the African business to separate from Barclays Plc.
- R8.6bn in recognition of the investments required in technology, rebranding and other separation projects;
- R900m to cover separation related expenses, and
- R3.3bn to terminate the existing service level agreement between Barclays and and its African business, relating to the Rest of Africa operations acquired in 2013.
Barclays added that the separation process is expected to have an impact on Barclays Africa’s financial statements for the next few years, by increasing the capital base in the near-term and generating endowment revenue thereon, with increased costs.
“Consequently, BAGL will start to report normalised results that better reflect the underlying performance of the Group once the contributions have been received,” said the group.
“In addition, Barclays Plc has agreed to contribute an amount equivalent to 1.5% of BAGL’s market capitalisation (R2.1bn) towards the establishment of a larger broad-based black economic empowerment scheme,” said the note.
The shares were trading 0.75% lower at R156.39 in later afternoon trading on Thursday.Read Fin24's top stories trending on Twitter: Fin24’s top stories