South Africa’s PIC Has ‘Appetite’ for Barclays Africa Stakeby and
Money manager wants partner with cash to back purchase in bank
Accelerated bookbuild may leave PIC with ‘significant’ stock
Public Investment Corp., Africa’s largest money manager, said it’s interested in boosting its holding in Barclays Africa Group Ltd. and is still considering the best partner to team up with for a bid.
“There is appetite from our side to increase our stake,” Chief Executive Officer Dan Matjila said in an interview in Pretoria on Tuesday. “We’re still assessing which is the best partner to go with and the best partner with cash,” he said, adding that the ideal co-investors would be South African, or if international, a partner who backs South Africans.
Plans by PIC to form a consortium of black shareholders to buy a stake have been hindered because they’re struggling to raise finance, people familiar with the matter said last month. While earlier this year PIC faced competition for the shares, U.S. private-equity company Carlyle Group LP has now withdrawn from bidding with Bob Diamond’s Atlas Merchant Capital LLC, the former Barclays Plc CEO said last month. Abraaj Group is also no longer in talks for the business either, people familiar with the matter said.
Diamond, who in April said he was working with investors on a potential purchase with Carlyle, wouldn’t be drawn on whether his bid was ongoing in an interview with Bloomberg Radio in New York last month. The PIC had preliminary meetings with companies tied to Diamond earlier this year.
“Talks with Bob Diamond ended a while ago,” Matjila said.
PIC, which holds about 6.4 percent of Barclays Africa on behalf of South African government employees, has seen a lot of interest in getting together a group of investors to buy shares in the Johannesburg-based lender, Matjila said. Barclays plans to reduce its 50.1 percent holding in South Africa’s third-largest bank to 20 percent or less in order to comply with regulations and boost capital levels.
London-based Barclays sold more than 12 percent in its African unit to investors including PIC in May though an accelerated bookbuild. “If there was an accelerated bookbuild we may have to hold a significant amount as a result of our structure and the benchmarks we are expected to track,” Matjila said. “We would need permission if our holding were to go more than 20 percent.”
Not only would PIC have to get acceptance from South African authorities, Barclays itself needs approvals in South Africa, the U.K. and all of the other 11 Africa countries in which Barclays Africa operates, according to Adrian Cloete, a banks analyst at PSG Wealth in Cape Town. “It’s not just about writing a check. There is no process in law for this at the South African Reserve Bank or the U.K. authorities; regulatory de-consolidation is very complex.”
Barclays is likely to retain 15 percent to 20 percent and place the rest of its holdings with institutional investors over the next few years, Cloete said. A bookbuild process, which offers stock to all shareholders and institutional investors, would be a fair way to place the securities rather than offering it to a few selected money managers and pension funds, he said.
With other potential bidders having withdrawn from the race, the market may now believe that “an accelerated bookbuild of a large chunk of shares is a probable event,” according to Neelash Hansjee, banks analyst at Old Mutual Plc’s investment-management unit in Cape Town.
Bookbuild or not, PIC, which manages more than 1.85 trillion rand ($136 billion) in assets, wouldn’t necessarily buy shares just to create a black-investment shareholding in Barclays Africa, Matjila said. If it did end up with an excess of stock, it could sell these securities to black investors, he said said.
“Whether there is a bookbuild, it’s in Barclays’ hands,” he said. “They would have to tell us.”
Barclays Africa fell as much as 2.6 percent and was trading 0.6 percent down at 154.43 rand as of 11:22 a.m. in Johannesburg. The FTSE/JSE Africa Banks Index has climbed 17 percent this year, while Barclays Africa has lagged, gaining 7.6 percent.
The shares are being weighed down by worries of an “overhang” that may occur depending on how Barclays disposes of its stake, said Patrice Rassou, head of equities at Sanlam Investment Management in Cape Town. Concerns are maybe more acute because of the pressure European banks have been under following speculation about Deutsche Bank AG’s capital levels in the wake of a $14 billion claim from the U.S. Justice Department, he said.