Barclays may not be able to strike a deal with a South African bank, Absa, with its £2.6bn (31.4bn rand) offer for a huge 60 per cent stake in it. That is because shareholders in Absa seem to want more.
Barclays has proposed 79 rand per share, with a dividend of 1.8 rand a share for the 60 % stake in Absa. Since the offer is already 4 % higher than Friday's closing price and also one third higher than the price when Barclays first showed interest in the takeover, it is quite unlikely that the offer will be raised by the British bank.
Barclays has been contemplating a deal with Absa for the past seven months in view of its overseas expansion plans and its bid to combat severe competition in Britain. Absa, meanwhile, owns 688 offices, including offices in parts of Europe, Asia and the United States. Analysts however, say that for the deal to consummate, Barclays would have to raise its price. Now, the British bank is facing a tough time now trying to convince Absa shareholders to sell as most of them believe that Absa can do well on its own.
The failure of the deal will be a hard blow for Barclays as anti-apartheid protesters had compelled it to quit South Africa about 20 years back and this was its golden chance to make a huge comeback. Likewise, South Africa will also lose out on one of the largest foreign deals after apartheid. Chris Steward, a fund manager at South African-based Investec Asset Management that owns 4.5% of Absa’s shares, said "They have to go back and consider whether they want to pay a little bit more to make the transaction happen or whether they decide they don't want to. They have invested a fair degree of time and if they don't do the transaction now, they are really going to battle to get a transaction done at any stage in the future. It is back to the drawing board for Barclays."
Alternatively, if a deal was successfully completed, Absa's pre-tax profits would rise by R1.4bn over four years after incurring expenses of R1.8bn during the first three years; according to Barclays.
At the moment, however, the much sought deal between both the banks remains stalled with no certainty whatsoever of a successful bid.
Posted
on : Tue, 26 Apr 2005 00:00 GMT | Banking News
By : Paula Jenkins
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