Barclays PLC says it has submitted an application to the South African Reserve Bank for approval to reduce its shareholding in the Barclays Africa Group Limited (BAGL) to below 50%.
The application, which also requires the approval of the Minister of Finance, based on the advice from the Registrar of Banks, includes the terms of the separation payments and transitional services arrangements, which have been agreed between Barclays PLC and BAGL.
The agreed terms provide for contributions by Barclays PLC to BAGL totalling £765 million (ZAR12.8 billion), primarily in recognition of the investments required for the Group to separate from Barclays PLC.
These contributions, comprise £515 million (ZAR8.6 billion) in recognition of the investments required in technology, rebranding and other separation projects; £55 million (ZAR0.9 billion) to cover separation related expenses, of which £27.5 million was received in December 2016; and £195 million (ZAR3.3 billion) to terminate the existing service level agreement between Barclays and BAGL, relating to the Rest of Africa operations acquired in 2013.
“As part of the agreed terms, from the date on which Barclays PLC reduces its shareholding in BAGL to below 50%: BAGL can continue to use the Barclays brand in the rest of Africa for three years; and BAGL will receive certain services from Barclays on an arms’ length basis for a transitional period, typically up to three years,” the bank said in a filing.
According to Barclays, the expectation is that the financial contributions will neutralise the capital and cash flow impact of separation investments on the Group over time. However, it said the separation process will have an impact on BAGL’s financial statements for the next few years, most notably by increasing the capital base in the near-term and generating endowment revenue thereon, with increased costs likely over time as the separation investments are concluded.
“Consequently, BAGL will start to report normalized results that better reflect the underlying performance of the Group once the contributions have been received. In addition, Barclays PLC has agreed to contribute an amount equivalent to 1.5% of BAGL’s market capitalisation (ZAR2.1 billion) towards the establishment of a larger broad-based black economic empowerment scheme,” it said.
“BBB wishes to reiterate that Barclays PLC’s reduction of its shareholding in BAGL will not affect BAGL’s shareholding in its African operations, including BBB. BBB continues to have a clear strategy in Botswana and remains focused on executing that strategy. BBB is a profitable business, well capitalised and is financially independent of Barclays PLC.BBB will continue to serve its customers as it has done for over 66 years.”