Ann Crotty

At just more than R162, the Absa share price is currently R21 above the level at which the Barclays Africa transaction was priced. This means that the African assets being bought are valued at R2.67 billion, or 15 percent, more than the original value attributed to them.

The Absa shareholders are meeting this morning to vote on the transaction and, while some institutional shareholders have expressed concerns about the dilution of their holdings, the deal is expected to get the necessary approval from the minority shareholders.

When the details of the deal were announced in November the Absa share price was R141. On the basis of this share price Absa would issue 129.5 million shares to Barclays in exchange for the acquisition of the bulk of Barclays’ Africa assets. This attributed a value of R18.33bn to the assets. However, on the basis of Friday’s closing price the issue of the shares attributes a value of R21bn to Barclays’ Africa assets.

In its independent “fairness” opinion on the terms of the transaction, for which it was paid R23 million, Deutsche Bank said “as at the date hereof, the consideration is fair, from a financial point of view, to the Absa shareholders”.

Deutsche Bank’s opinion, contained in the circular to shareholders on December 14, added: “This opinion contained in this letter does not address the prices at which the Absa shares or any other securities will trade following the announcement or consummation of the proposed transaction.”

The hike in Absa’s share price in the past two months has been attributed to the pending deal with Barclays and so analysts believe Absa will not feel pressure to adjust the number of shares issued to Barclays.

Afrifocus research head Johann Scholtz told Business Report on Friday that the rise in the share price was a reflection of the improved prospects for Absa following the deal.

However, shareholder activist Theo Botha is adamant that the transaction is prejudicial to the minority shareholders because their holdings will be diluted.

“All of the shareholders and not just Barclays should have been given the opportunity to take up the shares needed to fund this deal,” Botha said.

He said the deal would increase Barclays’ stake in Absa from 55 percent to 62 percent, while the stake of minority shareholders would reduce to 37 percent from 44.5 percent.

Botha told Business Report that once the deal was done, the total foreign shareholding in Absa would be 75 percent and he noted that the resulting annual flow of dividends out of the country would be substantial. He said it was unclear what, if any, checks and balances were in place to ensure that the foreign holding did not increase to 100 percent.

Botha said the deal was particularly troubling given that it was being completed amid extensive revelations about inappropriate behaviour by Barclays, including manipulating the London interbank offered rate and misselling products.

As the UK’s Financial Times recently noted, Barclays is more mired in scandal than any other bank.

Botha also questioned why Barclays was not guaranteeing the profits of the assets being sold to Absa.

Absa’s shares rose 0.06 percent to R162.15 on Friday.