London / Johannesburg: Barclays Plc said it sold about one-fifth of its stake in Barclays Africa Group Ltd. for about 13.1 billion rand ($879 million) as part of Chief Executive Officer Jes Staley’s plan to overhaul the British lender.

The bank sold 12.2 per cent of shares to money managers, leaving it with a holding of 50.1 per cent, it said in a statement on Thursday. The shares were bought for 126 rand each, a discount of about 11 per cent to the average price over the past 30 days, according to data compiled by Bloomberg. The sale is expected to increase Barclays’ common equity Tier 1 ratio, a measure of financial strength, by about 10 basis points.

“This represents an initial step towards delivering management’s previously stated strategy to sell down its stake in Barclays Africa Group to a level that will permit regulatory de-consolidation over the next two to three years,” Gary Greenwood, an analyst at Shore Capital Group Ltd., who rates Barclays a buy at 162 pence, said in a note. Barclays will only be able to reap significant capital benefits from the process once its stake drops below 20 per cent, he said.

Staley, who took over last year, announced on March 1 the bank was retreating from Africa with other measures to raise cash, shrink globally and lighten its capital burden. Barclays Africa is South Africa’s third-largest bank and has operations in 12 nations across the continent, with more than 12 million customers. While it continues to grow and has produced both increased profit and dividends, European and UK banking regulations have eroded the parent company’s ability to benefit from the expansion.

40% Local

Barclays sold 40 per cent of the shares to investors in South Africa and international money managers took up the rest, two people familiar with the matter said, asking not to be identified because the deal hasn’t settled yet. The accelerated book build was oversubscribed and the shares went to well-known institutions, according to the people. Hedge funds also received some of the shares, they said. Barclays declined to comment.

There were more than 125 investors interested in the shares and the buyers were a mix of South African and global institutions, Barclays Africa said, without disclosing names. The top 25 investors were allocated about 90 per cent of the offering and some of the investors are new to Barclays Africa, it said. Others, such as The Public Investment Corp., Africa’s biggest money manager, are existing shareholders, the bank said.

Shares Decline

Shares in Barclays Africa fell as much as 4.2 per cent to 129.05 rand, and were almost unchanged at 134.75 rand as of 11:39am in Johannesburg. The stock has declined 6.1 per cent this year, the third-biggest drop among South Africa’s four biggest banks after Old Mutual Plc’s Nedbank. Barclays was little changed at 162.3 pence in London.

“Given the size of the placement, the price seems about right,” said Garth Mackenzie, the founder of Johannesburg-based Traders Corner. “Book builds happen in an auction type process so this price was determined by the level of demand in the market.”

All of the remaining shares in Barclays Africa held by the UK bank will be subject to a 90 day lock-up period, according to the UK lender’s statement.

One of the parties that’s expressed an interest in the African business is former Barclays CEO Bob Diamond, who is readying a bid via a consortium of investors including US private-equity giant Carlyle Group LP. Diamond would combine the business with his African-banking company Atlas Mara Ltd.

Doubts Raised

South Africa raised doubts over Diamond’s potential offer for a stake in Barclays Africa when the central bank said on Tuesday that private-equity bidders for the country’s third-largest lender would face opposition from regulators. Under present rules, an investor seeking to buy more than 15 per cent of a South African lender needs approval from the South African Reserve Bank, while the purchase of a controlling stake will need the consent of the finance ministry, according to the central bank.

It’s not likely that Diamond would be able to buy what remains of Barclays Africa, said Brad Preston, chief investment officer at Mergence Investment Managers, which has 20 billion rand of assets.

“The SARB would want a long-term, financially strong holder and I’m not sure the Bob Diamond consortium qualifies,” he said in an emailed response to questions. “Having said that, it is interesting that Barclays sold down to 50.1 per cent, retaining control and avoiding an accounting deconsolidation. This could suggest that they want to keep the option of selling a controlling stake open.”