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ALERT: Barclays to now sell 33.7% of Absa parent unit

Cape Town – Barclays increased the stake it will sell in its Barclays' Africa division from 22% to 33.7% on Thursday due to strong investor demand.

The value of this stake rose from R26bn to R37.71bn, Barclays revealed in a statement on Thursday. This follows the announcement on Wednesday that the bank was selling a 22% stake in its African unit, Barclays Africa.

Barclays will still hold a 16.4% stake in the company, but 1.4% of this will be “contributed to a black economic empowerment scheme in due course, leaving a residual holding of approximately 15%”.

“As previously announced, the Public Investment Corporation (PIC) has agreed to be an anchor investor in the placing, however it requires certain regulatory approvals before it can take up its allocation of the placing shares,” it said in a statement.

“Delivery in respect of the placing shares to be taken up by PIC is expected to occur at a later date following receipt of the necessary regulatory approvals.”

Bank has demand for all shares on previous offer - Bloomberg

The bank had demand for all 22% of the shares that were place on offer on Wednesday, according to a person with knowledge of the plan. Barclays, which currently holds 50.1% of Barclays Africa, said it has a long-term target of reducing its shareholding in the unit to 15%.

The placement marks the second phase of Barclays’s plan to gradually sell down its stake and deconsolidate the unit from its accounts, releasing capital that can be invested elsewhere in the business. Chief Executive Officer Jes Staley, 60, decided to reduce the lender’s presence on the continent in favor of supporting a trimmed-down investment bank focused on London and New York.

“Regulatory approval for the separation” is “a key milestone in the execution of our strategy and the restructuring of Barclays,” Staley said in an email.

The PIC plans to purchase a 7% stake through the sale, subject to regulatory approvals. The state-owned money manager was prevented from following through on its intention of buying a bigger stake because of regulatory issues, Johannesburg-based newspaper Business Report said, citing PIC CEO Dan Matjila.

Barclays Africa shares fell 4.8% to R139 in Johannesburg on Wednesday.

Gordhan firing

The second sale follows the disposal of a 12.2% stake to fund managers in South Africa and abroad in May 2016. The latest phase was said to have been delayed after South African President Jacob Zuma fired Finance Minister Pravin Gordhan at the end of March, replacing him with Malusi Gigaba. Gordhan had given provisional approval to a separation agreement that involves the UK lender paying its subsidiary £765m.

Barclays will also contribute £110m to help establish a “broad-based black economic empowerment scheme” in the country as part of the separation, the lender said in a separate statement Wednesday. The bank said it expects more costs to be incurred during the transition process after taking an £884m writedown on the division in the first quarter.

The British bank, which has had a presence on the continent for more than 100 years, first bought a controlling stake in the South African lender in 2005 when the Johannesburg-based company was still called Absa Group. It paid $5.4bn for a 60% holding. That stake increased to more than 62% in 2013 as part of a reshuffle that saw Absa take over Barclays’s operations in eight African countries.

Deconsolidating Africa will boost Barclays’s common equity Tier 1 ratio, the key measure of capital strength, by at least 0.75 percentage point from 12.5% at the end of March, the bank has said.

The share placement is being coordinated by Barclays itself, aided by Citigroup, Deutsche Bank and UBS Group, according to the statement. Barclays can’t sell any more Barclays Africa stock for 90 days after the latest placement is settled, a provision known as a lock-up restriction.

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