Wrap Text
Terms of separation with Barclays signed
BARCLAYS AFRICA GROUP LIMITED
Incorporated in the Republic of South Africa
Registration number: 1986/003934/06
ISIN: ZAE000174124
JSE share code: BGA
(“Barclays Africa” or “BAGL”)
ABSA BANK LIMITED
Incorporated in the Republic of South Africa
Registration number: 1986/004794/06
ISIN: ZAE000079810
JSE share code: ABSP
(“Absa Bank”)
TERMS OF SEPARATION WITH BARCLAYS SIGNED
Background
Barclays PLC (“Barclays”, including, where required by the context, its relevant subsidiaries)
announced on 1 March 2016 that it intended, over a two- to three-year period, to reduce its
shareholding in Barclays Africa Group Limited (“BAGL”, including, where required by the
context, its relevant subsidiaries) to a level which will permit Barclays to de-consolidate
BAGL from a regulatory perspective and, prior to that, from an accounting perspective.
On 23 February 2017, BAGL announced that the terms of the transitional services
arrangements and the separation payments (the “Separation Arrangements”) had been
agreed with Barclays. These were submitted to relevant regulators as part of a request for
approval by Barclays to sell down its holding in BAGL to below 50%.
Regulatory approval
As announced earlier today, Barclays and BAGL have now received the required regulatory
approvals from the Minister of Finance in South Africa for Barclays to reduce its holding in
BAGL to below 50%.
Key separation agreement terms
Furthermore, Barclays and BAGL have today entered into the agreements governing the
terms on which the separation will occur. The key terms of these agreements are as follows:
Separation contribution and timing
As announced on 23 February 2017, the separation terms include contributions from
Barclays to BAGL, which BAGL will use to separate from Barclays, totalling £765 million and
comprising:
- £55 million to cover separation-related expenses, of which £27.5 million was paid in
December 2016, with the remaining £27.5 million (ZAR465 million) (note 1) to be paid on
the date on which Barclays’ holding in BAGL falls to 50% or below (“Initial Sell Down
Date”);
- £515 million (ZAR8,293 million) (note 2) to provide additional capital to BAGL to allow it
to make investments required to separate, including in respect of technology, rebranding
and other separation projects. The contribution is to be made 30% on signing of the
agreements and 70% on Initial Sell Down Date; and
- £195 million (ZAR3,295 million) (note 1) for terminating the existing Master Services
Agreement between Barclays and BAGL, which governs the provision of services by
Barclays to the BAGL subsidiaries acquired from Barclays in 2013 (the “MSA”), which
will be contributed on the Initial Sell Down Date.
The expectation is that the financial contributions will neutralise the capital and cash flow
impact of separation investments on BAGL over time. However, 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 normalised results that better reflect the underlying
performance of the business once the contributions have been received.
Black economic empowerment contribution
In addition, Barclays will contribute the equivalent of 1.5% of BAGL’s market capitalisation,
equating to approximately ZAR1,856 million (note 3), towards the establishment of a broad-
based black economic empowerment (“BBBEE”) scheme. Further details on the proposed
BBBEE scheme will be communicated in due course.
Intra-group agreements
Subject to certain limited exceptions, the current intra-group arrangements between Barclays
and 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 provided, which range from three months to
three years, subject to extension(s).
Governance framework and protective covenants
A governance framework will apply during the separation. Certain protective covenants
(including non-compete arrangements and non-solicit obligations) will apply to Barclays, 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.
Brand and trademarks
The Separation Arrangements also include a Transitional Trade Mark Licence agreement
(“TTML”), which will be effective from the Initial Sell Down Date, to replace the existing
trademark licence agreements between Barclays and BAGL. In terms of the TTML, BAGL
will continue to use the Barclays brand for up to 12 months in South Africa and for up to
three years in other BAGL presence countries, subject to limited exceptions. Further details
on rebranding will be communicated in due course.
Indemnities
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, untrue statements or omissions contained in any document issued by Barclays in
connection with any placing or marketing of BAGL shares under the proposed sell-down of
BAGL shares, and any failure by any Barclays company to discharge any liability in respect
of taxation for which Barclays 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
(ZAR10,385 million) (note 4).
Notes:
1. Payable in GBP. Converted at a GBP:ZAR exchange rate of 16.8949 as at 30 May 2017;
2. Payable in ZAR at a GBP:ZAR exchange rate of 16.1029 (being the prevailing exchange rate on
1 March 2017);
3. Based on BAGL’s share price of R145.95 as at 30 May 2017; and
4. Converted at a GBP:ZAR exchange rate of 16.8949 as at 30 May 2017.
Johannesburg
31 May 2017
Enquiries:
Alan Hartdegen (Head of Investor Relations)
(+2711) 350-2598
E-mail: Alan.Hartdegen@barclaysafrica.com
Lead independent sponsor to Barclays Africa:
J.P. Morgan Equities South Africa Proprietary Limited
Joint sponsor to Barclays Africa:
Corporate and Investment Bank, a division of Absa Bank
Date: 31/05/2017 05:06:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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