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Barclays To Pay $5.5 Billion For Absa Majority Stake
Barclays is making its return to South African business as it pays $5.5 billion for a majority stake in Absa.
South Africa's Finance Minister, Trevor Manuel approved the deal yesterday saying that it had more advantages than risks.
Barclays stopped doing business in South Africa 19 years ago as British protestors criticized the company for operating under the country's apartheid.
"We regard South Africa as a very attractive place to invest. It is a strong, well-run economy with good growth," said David Roberts, Barclays' head of international banking "(The deal) changes the dial of our international earnings."
Business Day says:
If it is accepted by shareholders, the transaction is expected to result in about R33bn flowing into the country, and also represents Barclays' largest acquisition outside the UK to date.
Announcing his approval of the deal yesterday, Manuel said allowing Barclays to buy Absa would not alter SA's policy of having four large banks. But it would open the way for foreign ownership in the sector.
"I think it is important that we deal with this on a case-by-case basis," said Manuel. "Theoretically it is possible to maintain the four pillars and for none of those to be South African owned."
Absa's pre-tax annual profit is expected to expand to 1.4 billion rand 4 years after the deal is made.
Barclays shares fell 0.2% while Absa shares rose 2.75%.
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Chris Crum
