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Barclays PLC and Barclays Africa Agree Separation Terms
Barclays Africa Group today announced that it has agreed terms for operational separation with UK-based Barclays PLC, which is reducing its shareholding in Barclays Africa. The agreement is expected to unlock opportunities for Barclays Africa as an independent pan African bank.
“It is a good outcome that enables us to complete the separation, and to provide continuity and improved service for our customers,” said Maria Ramos, Chief Executive, Barclays Africa.
UK-based Barclays PLC announced on 1 March 2016 that it intends to sell the majority of its shareholding in Barclays Africa over a period of two to three years. Since then, Barclays PLC and Barclays Africa Group have worked jointly to ensure the best outcome for all of our stakeholders.
Barclays PLC has submitted an application to the South African Reserve Bank for approval to reduce its shareholding in Barclays Africa Group to below 50%. The application, which also requires the approval of the Minister of Finance, includes the terms of the separation payments and transitional services arrangements, which have been agreed between Barclays PLC and Barclays Africa.
The agreement provides for contributions by Barclays PLC totalling GBP765 million (R12.8 billion based on 31 Dec 2016 exchange rate) primarily to fund the investments required for Barclays Africa Group to separate from Barclays PLC as follows:
£515 million (R8.6 billion) for investments required in technology, rebranding and other separation projects;
£55 million (R0.9 billion) to cover separation related expenses, of which £27.5 million was received in December 2016; and
£195 million (R3.3 billion) to terminate the existing service level agreement between Barclays and BAGL, relating to the Rest of Africa operations acquired in 2013.
The expectation is that the financial contributions will neutralise the capital and cash flow impact of separation investments on the Group over time.
Barclays PLC currently owns 50.1% of Barclays Africa. Following the reduction of Barclays PLC’s shareholding below the 50% mark, Barclays Africa will be able to continue using the Barclays brand at its operations outside of South Africa for three years. Barclays Africa will receive certain services from Barclays PLC on arms’ length basis for a transitional period, typically up to three years.
An important feature of discussions has been the provision for a broad-based black economic empowerment scheme. While the full details are still under consideration, we are pleased to announce that Barclays PLC has agreed to contribute an amount equivalent to 1.5% of Barclays Africa’s market capitalisation, or R2.1 billion (based on a Barclays Africa’s share price of R168.69 on 31 December 2016) towards the establishment of such a scheme.
“Separation has a number of implications for our business,” said Ramos. “It gives us the opportunity to unlock the potential to do things differently and build energy and momentum for our future as a pan-African organisation.”
Alongside a black economic empowerment scheme, Barclays Africa also wants to create an equity proposition for our staff in the next 12 to 18 months. This will give our people the opportunity to benefit from share ownership, and to share in the future growth of our business.
“Both these schemes will help us to build an ownership-based, entrepreneurial culture that goes to the heart of our commitment to the communities which we serve,” Ramos said.
We remain firmly focused on building a leading standalone Pan African financial institution.