Price haggling delays Barclays’ formal Absa offer
Stephen Gunnion
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Financial Services Editor
BARCLAYS Bank’s long-awaited formal offer to buy a majority stake in Absa will not materialise today, since minority shareholders are believed to still be holding out for a higher price, sources close to the process said yesterday.
Speculation that the offer from Britain’s third-largest bank was due today was originally heightened by a meeting of Absa’s board on Friday as well as visits to minority shareholders last week.
The banks, together with JPMorgan, which is advising Barclays on the deal, started canvassing the support of minorities last week. However, it is now believed that pricing could be delaying the announcement of the deal.
“They (minority shareholders) are holding out for more money. (But, Barclays) are only prepared to pay so much,” one source said.
“If everything had gone smoothly there would have been a big announcement on the deal on Monday (today).”
By yesterday the banks had also still not reverted to Finance Minister Trevor Manuel with a response to the conditions he placed on the deal in a meeting with top executives from the two banks earlier this month.
Although some analysts have suggested a bid in excess of R82 a share is needed to win the support of minorities, James Hamilton, banks analyst at West LB Equity Markets in London, said he would like the figure to be contained to less than R80. “While Absa doesn’t look expensive compared with valuations ascribed to European banks, there is more economic volatility in the South African economy and that means risk.
“If they end up paying in the low R80 range to take control, it’s a fairly full price and they are going to have to show the market they can get a lot more out of the Absa business than the current structure can deliver,” he said.
Hamilton said because Barclays had given the market no guidance on what it planned to do with Absa, it was difficult to predict the extent of the synergies it could extract from the deal and whether a price of more than R80 would be acceptable to Barclays’ shareholders.
“I think the probability is that the deal will happen,” Hamilton said. “Having gone so far it is difficult to walk away but I wouldn’t rule it out.”
The transaction, which will be worth about R27bn, will be Barclays’ largest investment outside of the UK, as well as the largest foreign direct investment in SA to date.
Absa’s shares retreated on Friday, closing 2,3% lower at R76,01 and giving the bank a market capitalisation of just less than R50bn. With Reuters
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