Barclays is locked in negotiations with its African subsidiary concerning the particulars of their divorce, which analysts estimate might value the British financial institution as a lot as £1bn.
Having introduced in March that it deliberate to promote down its controlling stake in its Johannesburg-listed African operation, Barclays now should agree the phrases on which the 2 will cut up.
Barclays Africa Group Restricted (BAGL) is dependent upon its UK father or mother for a variety of providers together with know-how, branding, human assets, credit score danger administration, strategic improvement and operational administration help.
To interrupt the grasp providers settlement that governs the supply of those providers, Barclays is predicted to pay a payment to its African subsidiary, during which it owns a 50 per cent stake value R64bn (£three.7bn). It additionally wants to barter a alternative providers settlement and have it permitted by regulators.
“Breaking apart is tough to do,” wrote Manus Costello, banks analyst at Autonomous, in a word to shoppers. “We consider that Barclays should enter right into a separation settlement with BAGL which could show costly.”
Extrapolating from the £210m of upfront prices for Lloyds Banking Group to spin-off its TSB unit in 2014, Mr Costello estimated Barclays might face separation prices of between £500m and £1bn. Barclays declined to remark.
“We expect the excessive value of separation will increase strain on Barclays to discover a strategic purchaser prepared to pay a premium; absent this, the market could be dissatisfied by the capital uplift delivered from the BAGL sale,” he wrote.
In Might, Barclays bought the primary chunk of its sixty two per cent stake in its African unit by way of a R13bn ($946m) putting with institutional buyers.
Having given itself till 2019 to finish the African sale, Barclays has persistently expressed confidence that it might promote the remainder of its shares on the open market if no strategic bidder materialised. Its former boss Bob Diamond is among the potential bidders who has expressed an curiosity. The financial institution is predicted to maintain a ten to twenty per cent stake.
These prices usually are not but determinable as they might must be agreed with Barclays Africa administration
In a round to shareholders forward of this yr’s annual assembly, Barclays stated it will “have to co-function with Barclays Africa to facilitate an orderly transition of the operational help and different providers, together with model licensing and knowledge know-how help providers”.
It warned that “this course of could possibly be extra pricey and time-consuming than anticipated”, including that “termination prices can be payable by Barclays within the occasion of its voluntary termination of the Barclays grasp providers settlement”.
“These prices aren’t but determinable as they might must be agreed with Barclays Africa administration,” it stated. Jes Staley, Barclays’ chief government, stated in April that the talks with its African offshoot have been constructive and progressing properly.
Barclays is predicted to report pre-tax income excluding notable gadgets of £1.3bn for the third quarter when it presents its outcomes on Thursday — a slight drop from a yr in the past — based on consensus analyst estimates.
Mr Costello at Autonomous wrote that “following HSBC’s shock choice to purchase again shares, optimism has been constructing that Barclays may comply with go well with as soon as the BAGL sale is accomplished. If the separation is slower and extra pricey than anticipated, this might clearly be a blow to those hopes.”