Britain's Barclays agreed a $5.5 billion deal for control of lender Absa on Monday, marking its return to South African retail banking and the biggest direct foreign investment in the country. The UK bank's long-awaited announcement is a major vote of confidence in the South African economy more than a decade after the demise of the apartheid regime and 19 years after Barclays' forced exit from the country. Britain's third-biggest bank will pay 33 billion rand ($5.5 billion) in cash for 60 percent of Absa, South Africa's biggest retail lender, to boost its non-UK profits.
After eight months of talks, Barclays is offering 82.5 rand a share and Absa will pay its shareholders a dividend of 2 rand a share.
The deal heralds Barclays' return to mainstream banking in South Africa after it quit in 1986 because of protests in Britain against doing business under apartheid. Before selling at a loss, Barclays was South Africa's biggest bank.
"We regard South Africa as a very attractive place to invest. It is a strong, well-run economy with good growth," Barclays' head of international banking, David Roberts, told reporters on a conference call. "(The deal) changes the dial of our international earnings."
Barclays upped its price to win over minority shareholders. The British bank had initially bid 79 rand a share, with Absa paying a dividend of 1.8 rand.
After the transaction is sealed, Barclays will make about a third of its profits outside the UK, up from about 20 percent now. The purchase is Barclays' biggest step so far in a plan to double its share of profit from outside Britain to diversify risk and expand in higher-growth markets.
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