An offer by Barclays to acquire a majority stake in Absa
9 May 2005
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Agenda
Recommending the Barclays offer to Absa’s shareholders
Danie Cronjé
Chairman, Absa Group Limited
The Barclays offer – Realising Absa’s strategy
Steve Booysen
Group chief executive, Absa Group Limited
The Barclays perspective
David Roberts
Chief executive, Barclays International Retail and Commercial Banking
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Recommending the Barclays offer to Absa’s shareholders
Danie Cronjé
Chairman, Absa Group Limited
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Introduction
Significant announcement for Absa’s stakeholders
• First South African financial services group to partner with a global player since 1994 • The transaction illustrates confidence in South Africa and the continent of Africa • Benefits of the transaction - Accelerates Absa’s strategy - Allows Absa’s shareholders to realise value and share in future growth
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Accelerating Absa’s strategy
• Absa’s strategic intent is to be: - The leading financial services business in South Africa - And ultimately, the pre-eminent bank on the African continent • Absa’s board defined a strategy to partner with a significant global player • Barclays and Absa announced, in September 2004, that they had entered into formal discussions
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Why Barclays?
• Leading global financial services institution • Aa1/AA /AA+ credit rating, large capital base and preferential capital market access • Comprehensive world-class range of services, products and capabilities • Corporate and merchant banking expertise • Significant sub-Saharan African franchise
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What is Barclays offering?
Opportunity to realise value and share in future growth
• Shareholders will receive R82.50 per share • A final dividend of R2.00 will be paid to all shareholders • The offer, to acquire 60% of Absa’s shares, will be effected through two processes, conditional on each other: - A scheme of arrangement proposed by Barclays to acquire 32% of Absa’s shares; and - A voluntary tender offer by Barclays to acquire up to an additional 28% of Absa’s shares
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Significant support for the offer
• The Minister of Finance has approved the application • The offer is unanimously recommended by the Absa Group board and supported by management • The offer is also supported by: - An independent fairness opinion - Batho Bonke and Absa’s employee share trusts - Sanlam and Remgro and other key Absa shareholders have provided written support representing 63% of Absa’s share capital
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Absa board implications
• The Absa board will remain independent with a majority of independent non-executive directors • The size of the Absa Group board will not change significantly and will include:
- Four executive directors: Three from Absa (Steve Booysen, Jacques Schindehütte and Louis von Zeuner) and one from Barclays (Dominic Bruynseels) - Two new Barclays non-executive directors (David Roberts and Naguib Kheraj) - Sanlam and Remgro representatives to resign - Barclays will be represented on Absa’s major board committees
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The offer creates value
For South Africa and the continent of Africa
• Represents the largest foreign direct investment into South Africa to date • A beacon for foreign confidence and investment • Testament to South Africa’s significant political, economic and social progress over the past 11 years • Affirms South Africa’s position as a growing and important financial centre • Affirms South Africa’s position as an engine of African development
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The Barclays offer – Realising Absa’s strategy
Steve Booysen
Chief executive, Absa Group Limited
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Absa today…
Leader in personal banking
Leading financial services franchise Leader in personal banking Significant commercial banking player Bancassurance leadership • Seven million customers and growing • Strongest in the individual market • Leading position in medium and small business markets and the leader in agribusiness and the public sector • Successful bancassurance model with high penetration levels
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Absa tomorrow…
• Retain and grow our market leading position in personal banking • Become the leading player in commercial banking • Become the primary choice in the corporate and merchant banking arena • Significantly enhance our position in Africa • Optimise our world-class bancassurance model
Positioning Absa as the leading financial services business in South Africa and the pre-eminent bank on the African continent
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Absa tomorrow…
Strategies to achieve sustainable growth
• • • • • • Customer centricity Diversification of earnings streams Enhanced efficiency Intellectual capital development Capital and risk management Black economic empowerment
Absa’s strategic focus areas
Strategies to ensure sustainable growth
Specific focus on: • Enhancing the customer experience • “Getting the basics right” • Leadership in the black middle market • Growing Absa’s wholesale and African operations • Embracing transformation
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Absa and Barclays together…
Combining our strengths
Combining the leading South African retail bank with… …a leading global bank with world-class capabilities
• Building the South African franchise (Phase l) • Enhancing global reach (Phase l) • Accelerating Absa’s African expansion strategy (Phase ll) • Adding value for all stakeholders
Phase l synergies
R1.4 billion of pre-tax synergies per annum four years after the completion of the transaction, split 60:40 between revenue uplift and cost efficiencies
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Combining our strengths
Leveraging Barclays world-class capabilities and expertise to build the South African franchise Personal banking
• Combine Barclays retail customer relationship management and product packaging capabilities with Absa’s retail franchise • Apply Barclays customer value management approach to credit cards and consumer finance
Commercial banking
• Implement Barclays value aligned performance management methodology • Leverage Barclays world-class credit assessment and relationship management approach
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Combining our strengths
Leveraging Barclays world-class capabilities and expertise to build the South African franchise Corporate and merchant banking
• Upgraded and broadened suite of risk management and financing products • Enhanced access to major corporate clients • Access to international origination and distribution • Significantly improved trading capabilities based on stronger client flows • Roll out of leading edge transactional banking system
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Combining our strengths
Leveraging Barclays world-class capabilities and expertise to build the South African franchise Information technology and operations
• Leverage Barclays IT capabilities • Enhance procurement organisation and practice • Further centralise and automate administration and processing
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Combining our strengths
Leveraging Barclays world-class capabilities and expertise to build the South African franchise Brand
• Absa has a highly rated South African financial services brand with significant value • Barclays has a powerful brand with global reach • Absa and Barclays intend to capitalise on the respective strengths of each of the Absa and Barclays brands • The branding approach will be driven by customer preferences
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Combining our strengths
Enhancing global reach
• Integration of Absa’s international operations into Barclays, where appropriate • Expand global service offering to South African customers • Service multi-national accounts on an integrated basis • Access to Barclays global distribution network
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Combining our strengths
Accelerating African expansion
• Significantly accelerates Absa’s African strategy • Entails the intended acquisition and integration of Barclays ten sub-Saharan operations on an arms-length basis - Subject to regulatory approval and independent board and shareholder approval, as required • Complementary African operations, overlapping only in South Africa, Zimbabwe and Tanzania • Opportunities for growth include leveraging Absa’s retail products and capabilities into Barclays Africa • To be agreed once the offer has been implemented
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Adding value for all stakeholders
Shareholders Customers Employees The community Governments and regulators
• Offer enables Absa’s shareholders to realise value and share in future growth • Access to a broader range of products and services • Enhanced opportunities through business growth and expansion • Continued commitment to upliftment and the development of South Africa and Africa • Build a better South Africa and Africa by supporting transformation and the development of financial services markets
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The Barclays perspective
David Roberts
Chief executive, International Retail and Commercial Banking Barclays PLC
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Strategic context
• Accelerates Barclays strategic priorities
- ‘Develop Retail and Commercial Banking activities in selected markets outside the UK’ - ‘Accelerate growth of global product businesses’
• South Africa – An attractive market
- Strong macro economic growth prospects - Attractive banking market with excellent growth prospects and returns - Sophisticated economic and financial services infrastructure
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Why Absa?
• Strong and growing earnings base • Extensive multi-channel distribution network • Highly-rated South African financial services brand • Complementary African operations • Great team, with similar values
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Meets our financial criteria
• EPS accretive immediately and economic profit positive within a year • Transaction funded from cash resources and preference share issuance • Tier 1 impact of 60 basis points • Post-completion – approximately one-third of Barclays Group earnings from outside the UK
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Strong upside potential
• Absa’s shareholders to participate in value uplift - R1.4 billion of pre-tax synergies four years after completion - Split 60% revenue uplift and 40% cost efficiencies - Implementation costs of R1.8 billion over the first three years • Further value uplift potential through the proposed integration of Barclays and Absa’s African operations • Proven track record in achieving targets
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Commitment to South Africa
Investment
• Barclays is committing c. R33 billion, the largest foreign direct investment in South African history • Undertaking to maintain an Absa listing on the JSE and meaningful free float
Financial Sector Charter and BEE
• Strong commitment to broad-based black economic empowerment (BEE) • Extend banking and financial services to the under-banked in South Africa • Leading exponent of Corporate Social Responsibility
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Management and employees
Management
• Executive management drawn from existing Absa leadership team plus selected Barclays appointees
Employees
• Enhanced career opportunities and expected job creation • Continued partnership with trade union
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Corporate governance and regulatory considerations
Corporate governance
• Committed to highest corporate governance standards • Absa’s board will consist of a majority of independent non-executive directors • Compliance with King II Code, the Banks Act and Sarbanes-Oxley
Regulatory framework
• South African Reserve Bank will remain Absa’s principal regulator
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Intended transaction timetable
9 May 2005 20 May 2005 13 June 2005 21 June 2005 8 July 2005 13 July 2005
• Announcement of firm intention to make an offer and declaration of Absa’s final dividend • Post joint circular to Absa’s shareholders • Offer period formally open and Code timetable applies • Scheme meeting of Absa’s shareholders and general meeting of Absa’s shareholders to be held • Court hearing to sanction scheme • Record date for the scheme and tender offer • Anticipated settlement date for the acquisition
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A compelling transaction
Good for:
• Barclays • Absa • Shareholders • Customers and employees
Great for:
South Africa
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Disclaimer
The Recommended Acquisition by Barclays of a majority of the Absa shares is governed by the laws of South Africa. The Recommended Acquisition is not being made and may not be accepted in any jurisdiction where it would be unlawful to do so nor does this presentation constitute an offer (or the solicitation of an offer) for the purchase or sale of securities in, any jurisdiction where such distribution or offer is unlawful. This presentation is forwarded or transmitted for information purposes only to jurisdictions outside South Africa in which it is illegal to make or accept the Recommended Acquisition proposals. Any acceptance received from any jurisdiction where the Recommended Acquisition is illegal may render invalid any purported acceptance of the Recommended Acquisition proposals. Before distributing or transmitting documentation relating to the Recommended Acquisition or taking any other action in relation to the Recommended Acquisition in any jurisdiction outside South Africa, you should inform yourself of and observe all applicable law and regulation. These materials have been provided to you by Barclays and Absa. No reliance may be placed for any purpose whatsoever on the accuracy of the information or opinions contained in these presentation materials or its completeness. No responsibility or liability (save in respect of fraud) is or will be accepted for any information or opinions expressed in this presentation or any other information provided in relation thereto (in whatever form) or omitted therefrom and no representation or warranty, express or implied, is or will be given by Barclays or Absa or any of their respective agents or advisers in relation to such information. The information set out in this presentation may be subject to updating, completion, revision, verification or amendment and such information may change materially. Accordingly, this presentation does not constitute or form part of, and should not be construed as, an offer for the purchase or sale of, or the solicitation of any offer to buy or sell, any securities of Barclays or Absa nor should it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision in connection with the Recommended Acquisition described in this presentation should be made solely on the basis of the information contained in the circular to be published subsequently in connection with the Recommended Transaction. This presentation does not constitute a recommendation regarding the securities of Barclays or Absa and nothing contained herein should be construed as investment advice or tax, accounting or legal advice. Many of the statements included in this presentation are forward-looking statements that involve risks and uncertainties. You can generally identify forwardlooking statements by the use of terminology such as “may”, “will”, “expect”, “intend”, “plan”, “estimate”, “anticipate”, “believe”, or similar phrases. All statements, other than statements of historical facts, including, among others, statements regarding Barclays or Absa's future financial position, business strategy, projected levels of growth in the banking and financial markets, projected costs, estimates of capital expenditures and plans and objectives of management for future operation, are forward-looking statements. Absa's and Barclays actual future performance could differ materially from these forward looking statements and you are cautioned not to place undue reliance on them. Factors that could cause the actual results, performance or achievements of Absa or Barclays to differ materially from those described herein include: the ability to complete the Transaction; the ability to integrate Absa's and Barclays businesses; costs associated with the acquisition or integration; the inability to realise the expected synergies from the acquisition; the inability to obtain all necessary regulatory approvals; the economic environment of the industries in which Absa and Barclays operate; and the political environment of the countries in which Absa and Barclays operate. Forward-looking statements involve known and unknown risks and uncertainties and other factors which may cause the actual results, performance or achievements of Absa or Barclays, or the industries in which they operate, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The information in this presentation is made as of the date hereof and Absa and Barclays have no obligation to update the information. All written and oral forward-looking statements attributable to Absa and Barclays or persons acting on their behalf are qualified in their entirety by these cautionary statements.
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