| Tue 26 Apr 2005, 9:27 | | Barclays’ Absa bid ‘a little miserly’ |
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Barclays’ Absa bid ‘a little miserly’ Stephen Gunnion -------------------------------------------------------------------------------- E-Mail article Print-Friendly Related Links The Bottom Line: Barclays and Absa Classic Business Day Transcript: Is London cynical about Barclays’ Absa deal? Financial Services Editor UK BANKING group Barclays has laid its cards on the table as it prepares to make an offer for a majority stake in Absa. However, following meetings with Absa minority shareholders it appears that the R31,42bn offered for a 60% stake may not be enough to win their support. The two banks said yesterday they had approached minorities with a potential partial offer of R79 a share. A final dividend for the year to March, estimated at R1,80, would also be paid. Greg Eckersely, head of Alliance Capital Management, which owns 3,9% of Absa’s stock, said: “It seems a little miserly. I’ll still have to think about it.” Although the R79 offer is 31% above the R60,50 Absa was trading at when Barclays announced its intentions last September, Wayne McCurrie, chief investment strategist at Momentum Multimanagers, said the entire market had gone up. “Barclays is paying a fair price relative to other banking shares, such as FirstRand and Standard Bank. South African banking stocks are cheap at these levels,” McCurrie said. “I wouldn’t sell bank shares at these prices.” Flip Rademeyer, finance director at Sanlam, which owns about 20% of Absa, said Sanlam would wait for the Absa board to recommend any offer before agreeing to sell. “We have always been supportive of the transaction as we think it is in the interests of Sanlam, Absa, Barclays and the country,” he said. The banks said they would “consider the feedback” from Absa shareholders before determining whether a transaction would receive the requisite support from shareholders on terms acceptable to Barclays. “Should an offer be made, it may or may not be at a premium to the prevailing market price,” they said. Shares in Absa gained 0,8% to R76,60 yesterday, after falling more than 2% on Friday. “I think they (Barclays) have painted themselves into a bit of a corner,” said Simon Maughan, head of European bank research at Dresdner Kleinwort Wasserstein in London. “This deal was announced six months ago when Absa’s share price was significantly lower. It was sold to UK shareholders as a fantastic deal…. Since then, the price has gone up significantly, so the economic value … has gone down.” He said Absa’s share price already included a bid premium. For Barclays to “pay another premium on top of that means they may run into opposition from their own shareholders”. International agency Fitch Ratings placed Absa on “rating watch positive” yesterday, saying it expected a recommended cash offer to be made and indicating that the bank could be upgraded if the deal went ahead. This would reflect the “enhanced support” for Absa from Barclays’ majority ownership. With Bloomberg
