| Fri 6 May 2005, 10:09 | | Barclays set to blink first by raising Absa offer |
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Barclays set to blink first by raising Absa offer
Stephen Gunnion
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Financial Services Editor
UK BANK Barclays is expected to raise its bid for a majority stake in Absa from R79 to R82 after a meeting of Absa’s board today. A formal offer to shareholders is expected to be made as early as next week.
Barclays and Absa met key investors again this week, when it was expected to address concerns they had with its previous proposals.
Meetings last month ended with Barclays saying it would revisit the terms of its proposed R79 offer to buy 60% of shareholders’ interests in Absa in a voluntary offer.
Some fund managers complained it was not offering enough, and there was a risk that some shareholders might not participate. About three fund managers are believed to be holding out for as much as R90 a share.
However, Barclays CEO for Africa and the Middle East Dominic Bruynseels said last week the group had little room to manoeuvre on how much it could pay for Absa.
Instead, Bruynseels said, the group would focus on how to structure its bid for 60% of Absa in a way that was fair to all shareholders.
Absa’s largest shareholders, Sanlam and Remgro, have indicated they are willing to sell their entire stakes in Absa, which come to about 29%.
Kokkie Kooyman, portfolio manager at Sanlam Investment Manager, said apart from the price, the percentage of shares being asked for was also an issue with investors.
Kooyman said if the ratio could be lowered from 60%-50%, or even below, R82 may be enough to win approval from investors.
Because Sanlam and Remgro were willing to sell their entire holdings in Absa, this meant the ratio for other shareholders could probably be lowered, Kooyman said.
He said Barclays could also buy a lower stake initially, and increase it later by selling its African operations to Absa in return for additional shares. “On this basis they could even go below 40%,” he said.
However, said Kooyman, this arrangement could be opposed by government, which may want that all the capital for the stake be paid upfront.
He also said that the institutional investors would also want to see all their competitors participating in the offer.
“If they can get the right balance between the three issues, I think that the deal would fly at R82,” Kooyman said.
While Barclays said last month that it wanted to buy 60% of Absa, international retail and commercial banking CEO David Roberts said the bank needed at least 56,3% to leave it with a majority stake in Absa once empowerment partner Batho Bonke had exercised its options to buy 10% in the banks.
Earlier this week, Batho Bonke chairman Tokyo Sexwale gave his support to the deal, saying it would be good for Absa shareholders and positive for SA.
Kooyman said there was a sense in the market that Barclays wanted to get the deal wound up as quickly as possible.
He said there was a good chance an announcement could be made early next week.
