Absa will issue Barclays with 18.3 billion rand ($2.1 billion) in shares, lifting Barclays' stake in Absa to 62.3% from 55.5%. In return Absa will get Barclays' operations in Ghana, Mauritius, Seychelles, Tanzania, Uganda and Zambia, as well as Barclays' 67.8% and 68.5% stakes, respectively, in separately listed subsidiaries in Botswana and Kenya, and the London bank's regional office in Johannesburg.
Absa, which will change its name to Barclays Africa Group Ltd., will gain operations with assets of about R81.6 billion, more than 400 branches, 2.2 million customers, and about 9,100 workers. On completion, Barclays Africa will operate across 10 countries with a workforce of 43,000, 14.4 million customers and 1,300 branches. "The deal signals a vote of confidence in Africa's future and its economic prospects," Absa CEO Maria Ramos (pictured) told journalists. "Investors will have an entry point into a leading sub-Saharan African banking group."
Other deals may eventually follow, she said.
"Nigeria remains a country that is important to us but right now we are working on getting this deal done."
As of June 30, Absa had assets of R808.8 billion. Barclays paid R33 billion for about 60% of the company in 2005 with the ultimate aim of folding its existing African interests into the new unit. Barclays and its South African subsidiary in 2008 briefly revisited that plan but the parties abandoned the idea because of soaring African valuations.
In October 2011, former Barclays CEO Bob Diamond moved Barclays' regional office from Dubai to Johannesburg and gave Absa CEO Ramos regional oversight.
The companies announced the latest round of merger discussions in August. Thursday's deal is the second significant one for Barclays CEO Antony Jenkins since he took the helm in late August after Diamond left following a Libor-rigging scandal. Diamond was followed out of the door by chairman Marcus Agius. Barclays in October agreed to buy the U.K. online business of the Netherlands' ING Groep NV.
Africa was last year the third largest contributor to Barclays' pretax profit after the U.K. and the U.S., generating £1.3 billion out of group pretax profit of £7.2 billion.
Absa shareholders need to approve the deal, but Barclays won't get to vote its own stake. The transaction also needs regulatory clearances in the various jurisdictions, a process Barclays CFO Chris Lucas said was going well.
Barclays will retain its operations in Egypt and Zimbabwe but these will be managed by Barclays Africa.
The parties hope to complete the deal by the end of June.
Absa shares were up 4.5% at R14,808 by early afternoon in Johannesburg, giving it a market value of R106.3 billion.
Barclays shares rose 2.7 pence, or 1.1%, to 249.10 pence, equating to a market value of £30.5 billion ($49.1 billion).
Barclays' financial adviser is Goldman, Sachs & Co. and legal advice comes from Clifford Chance LLP and Norton Rose LLP.
Absa's advisers are JPMorgan Chase Bank NA and Absa Corporate and Investment Banking, with legal advice from Webber Wentzel and Linklaters LLP.
Deutsche Securities (SA) Pty Ltd. acted as Absa's independent expert and KPMG LLP was its independent accountant.
Ernst & Young LLP served as independent auditor and reporting accountant on Absa's unaudited financial information.
KPMG LLP named Stephanie Schnabel as head of corporate development, sourcing deals and joint ventures and working on divestitures. For other updates launch today's Movers & shakers slideshow.
Printer and office software maker Xerox has agreed to sell its IT outsourcing operations to Atos for $1.05 billion, almost tripling the French buyer's U.S. revenue and making America its largest market. More video