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Barclays (BCS) Sells 12% Stake in Africa Unit: Now What?

Last week, Barclays PLC BCS initiated the plan to reduce its stake in Barclays Africa Group. The U.K. based bank sold roughly 12.2% interest (103.6 million shares of Barclays Africa) for over ZAR13 billion ($874.1 million).

The sale price of ZAR126 per share ($8.4 per share) represented a 7% discount to the Barclays Africa Group Limited’s (listed on Johannesburg stock exchange) closing price of the previous day. Notably, this will improve Barclays’ capital ratios by 0.10%.

Jes Staley, Barclays CEO said, “This is an important first step as we seek to reduce our shareholding in Barclays Africa to a level that achieves accounting and regulatory deconsolidation. As we said at our Q1 results, we continue to explore opportunities to reduce our shareholding, including capital market and strategic options.”

Following the completion of the deal, Barclays will hold a nearly 50.1% stake in the Africa unit.

According to some sources, the offer was 3.5 times oversubscribed. Barclays Africa shares were sold to approximately 100 institutions, with 40% being sold to African investors.

What’s the Next Move?

In Mar 2016, Barclays announced its intention to divest its stake in the Africa unit given the heightened regulatory pressure. Barclays Africa was moved to discontinued operation as it fulfilled the requirements for presentation as the same. Barclays plans to lower its stake to below 20% and intends to keep a minority interest in the unit.

Nonetheless, having witnessed such a huge demand for Barclays Africa shares, the U.K. bank is likely to get the confidence of totally exiting the stake at one go through the capital markets.

Further, Barclays Africa unit has attracted attention from several potential buyers. Barclays’ former CEO Bob Diamond is interested in the unit, as his company – Altas Merchant Capital venture – joined forces with The Carlyle Group LP CG and other investors to bid for the Africa unit. Whatever be the process of stake reduction, Barclays will definitely benefit from it.

Barclays is speeding up efforts to sell or close its noncore operations and this will surely strengthen its balance sheet and improve overall efficiency.

Currently, Barclays carries a Zacks Rank #2 (Buy). Other foreign banks worth a look include Grupo Financiero Galicia S.A. GGAL and Shinhan Financial Group Company Limited SHG. Both these stocks sport a Zacks Rank #1 (Strong Buy).

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BARCLAY PLC-ADR (BCS): Free Stock Analysis Report
 
SHINHAN FIN-ADR (SHG): Free Stock Analysis Report
 
GRUPO GALIC ADR (GGAL): Free Stock Analysis Report
 
CARLYLE GROUP (CG): Free Stock Analysis Report
 
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