Alert: Barclays confirms exit in Barclays Africa Group

Gerry Grimstone

After the news broke that Barclays will be selling off its remaining stake in Barclays Africa, the UK financial services major has confirmed the transactions.

See below the official statement:

Further to the announcement today, confirming that Barclays has received the necessary regulatory approvals to further sell down its position in BAGL and enter into agreements with BAGL governing the terms on which separation will occur, Barclays today announces its intention to sell approximately 187 million ordinary shares (the “Placing Shares”) in BAGL (the “Placing”), representing approximately 22% of BAGL’s issued share capital. This follows the initial placing that Barclays undertook on 5 May 2016 of 103.6 million shares representing 12.2% of the issued share capital of BAGL.

As previously announced, Barclays’ intention is to divest its shareholding in BAGL to a level which will permit Barclays to de-consolidate BAGL from a regulatory perspective and, prior to that, from an accounting perspective. This Placing further progresses Barclays’ intentions in both these respects. Barclays’ target long-term shareholding in BAGL is around 15%.

The Placing Shares are being offered to institutional investors by way of an accelerated bookbuild placing, which is open with immediate effect. The Public Investment Corporation SOC Limited (“PIC”) has confirmed its participation as an anchor investor in the Placing for approximately 59 million shares, representing 7% of BAGL’s issued share capital. The terms of the PIC commitment reflect PIC’s requirement for regulatory approvals in certain African jurisdictions. Delivery 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.

Barclays Bank PLC, acting through its investment bank (“Barclays Investment Bank”) is acting as lead global coordinator (the “Lead Global Co-ordinator”). Citigroup Global Markets Limited, Deutsche Bank AG, London branch, and UBS Limited are acting as co-global coordinators (the “Co-Global Co-ordinators”) and J.P. Morgan Securities plc (which conducts its UK investment banking activities as J.P. Morgan Cazenove) and Morgan Stanley & Co. International plc are acting as joint bookrunners (together with the Lead Global Co-ordinator and the Co-Global Co-ordinators, the “Joint Bookrunners”). BNP Paribas and Société Générale Corporate & Investment Banking are acting as co-bookrunners (the “Co-Bookrunners” and, together with the Joint Bookrunners, the “Banks”).

All of the remaining ordinary shares in BAGL held by Barclays PLC or its subsidiaries (excluding the 1.5% which Barclays has agreed to contribute towards the establishment of a black economic empowerment scheme and any shares held by BAGL and its subsidiaries) not sold in the Placing will be subject to a lock-up restriction from today until 90 days after settlement. During this period, the lock-up restriction may be waived with the consent of the Co-Global Co-ordinators (such consent not to be unreasonably withheld or delayed).

The final number of Placing Shares to be placed and the price per Placing Share will be agreed by Barclays and the Banks at the close of the bookbuild process, and the results of the Placing will be announced as soon as practicable thereafter.

Terms of the Separation Arrangements

The Separation Arrangements include contributions from Barclays to BAGL totalling £765 million which are comprised of the following:

· £515 million (at the 1 March 2017 GBP:ZAR exchange rate), to provide additional capital to BAGL to allow it to make investments required to achieve the separation, including in respect of technology, rebranding and other separation projects;

· £55 million to cover separation-related expenses, of which £27.5 million was paid in 2016; and

· £195 million for the termination of the existing Master Services Agreement between Barclays and BAGL which governs the provision of services by the Barclays Group to the BAGL subsidiaries acquired from Barclays in 2013 (the “MSA”).

Under the Separation Arrangements, Barclays has agreed to indemnify BAGL against certain potential losses suffered by BAGL, including as a result of (i) the business of Barclays Group, untrue statements or omissions contained in any document issued by the Barclays Group in connection with any placing or marketing of BAGL shares under the proposed sell down of BAGL shares and any failure by any Barclays Group company to discharge any liability in respect of taxation for which the Barclays Group is primarily liable (the “Perimeter Indemnity”); or (ii) BAGL having adhered to any Barclays policy which is not compliant with the laws for which that policy was designed (the “Policy Indemnity”). Barclays’ liability under the Perimeter Indemnity is uncapped and under the Policy Indemnity is capped at £614.7 million.

Subject to certain limited exceptions, the current intra-group arrangements between members of the Barclays Group and members of BAGL, including the MSA and the intra-group framework agreement (the “IGFA”), will terminate on the Initial Sell Down Date. The Separation Arrangements include a transitional services agreement (the “TSA”) to replace the existing MSA and IGFA. The TSA will be effective from the Initial Sell Down Date. The term of the TSA will be determined by the timeframes specified for the individual services being provided, which range from three months to three years, subject to extension(s).

The Separation Arrangements also provide for a governance framework which will apply during the implementation of the separation. Certain protective covenants (including non-compete arrangements and non-solicit obligations) will apply to the Barclays Group, in respect of the countries BAGL operates in, from today until three years from the Initial Sell Down Date. These protective covenants are subject to certain agreed carve-outs and it is expected that Barclays and BAGL will continue to cooperate for the benefit of mutual clients, where appropriate.

The Separation Arrangements also include a Transitional Trade Mark Licence agreement (the “TTML”), which will be effective from the Initial Sell Down Date, to replace the existing trademark licence agreements between the Barclays Group and BAGL. The TTML allows BAGL to continue to use the Barclays brand for up to 12 months in South Africa and for up to three years in other BAGL territories, subject to limited exceptions.