Barclays is poised to raise and restructure its £2.8bn offer for a 60 per cent stake in South Africa's largest retail bank, Absa, and will set out the terms as early as Monday.
Britain's third-largest bank is set to raise its offer to 82 rand (£7) a share, from the R79 a share plus a dividend of R1.80 indicated on 25 April. It is in talks with three of Absa's smaller shareholders, including Investec Asset Management and RMB Asset Management, which have been holding out for a higher price. Sources said the talks were progressing well and expressed confidence that Barclays had enough commitments from shareholders - 55 to 60 per cent - to get the deal done. Two large shareholders - Sanlam and the black investor group Batho Bonke - have publicly backed the bid.
Crucially, Barclays will structure the offer as a "scheme of arrangement" - a binding legal agreement requiring all shareholders to tender a certain proportion of their stock. The scheme would need the support of 75 per cent of investors as well as court approval. Some shareholders have been reluctant to tender their stock despite being in favour of the deal because they fear they would miss out on the expected continued rise in the share price while others who do not sell to Barclays would get a "free ride". Some think Absa shares could rise to more than R90 in a year. The two banks estimate synergies from the deal would boost Absa's pre-tax profits by R1.4bn annually in four years.
Since unveiling its indicative bid two weeks ago, Barclays has insisted that it would not raise the offer significantly. John Varley, the chief executive, said at the bank's annual meeting last week: "We like this potential deal and we hope to get it done. However, we are very clear that we will not forsake our value criteria to do so. There is a price beyond which we will not go."
A deal would mark the largest foreign investment in South Africa and Barclays' full return to the country after protests against its involvement during Apartheid forced it to pull out in 1986. Since the end of Apartheid in 1994, it has returned with a corporate banking operation.Reuse content