Local banking group Absa and its parent company Barclays are moving fast towards the “One Bank in Africa” ambition with the groups announcing yesterday a plan to rationalize their African operations.
The two groups announced yesterday that they are engaged in discussions about combining the majority of the Barclays Africa operations with Absa. The statement said these talks are expected to involve the combination of Barclays interests in Botswana, Ghana, Kenya, Tanzania, Uganda, Zambia and the Indian Ocean with Absa. Barclays will remain as the majority shareholder of the combined African operations.
Barclays acquired about 54% of Absa in 2005 and back indicated a willingness to let Absa become the principal operating entity across the continent. But this indication seems to have been abandoned and it now looks like Barclays will subsume Absa’s African operations. While analysts have welcomed yesterday’s announcement saying it will improve efficiencies there are those who will be worried about the long term implications of this move to the Absa brand. There is speculation that Barclays will in the long term gobble up the Absa brand and push the Barclays brand.
Absa CE Maria Ramos said “This proposed combination of the majority of the Barclays Africa businesses with Absa is the next logical step in delivering our “One Bank in Africa” strategy, which Barclays PLC announced last year. We have already consolidated the regional offices for Absa Africa and Barclays Africa, as well as introduced a global product strategy for banking across the continent. This proposed combination of the businesses will mirror the managerial and operational structure we have already put in place.
“We are tremendously excited by the opportunities for growth in Africa. We are wholeheartedly committed to our businesses across Africa and this proposed combination will help us to leverage the significant potential of these businesses. It will provide a platform for further growth that we firmly believe will be to the benefit of our colleagues, our customers and clients, our shareholders and the communities in which we operate.”
In yesterday’s statement the groups said the listings of Barclays subsidiaries in Kenya, on the Nairobi Securities Exchange, and in Botswana, on the Botswana Stock Exchange, would be maintained. Only Barclays holdings in these listed subsidiaries would be included in the proposed combination.
The proposed combination would be subject to, among other things, the approval of the Boards of Barclays and Absa (the latter on the recommendation of the independent members of the Absa Board), as well as Absa shareholder approval and regulatory approvals in the relevant jurisdictions.
There can be no certainty that these discussions will lead to a combination. The proposed combination would not be expected to be completed until 2013.
Whether or not successfully concluded, the proposed combination may have a material effect on the price of Absa’s shares.