For pure theater, it’s the deal that everybody would love to see: Robert Diamond Jr., who transformed Barclays Capital into one of Europe’s top investment banks before being ousted as group CEO of Barclays in 2012, returning to haunt his former employer by snapping up its African business at a bargain-basement price.
When new Barclays chief executive James (Jes) Staley announced on March 1 that the British bank was looking to sell its 62 percent stake in Barclays Africa Group as it seeks to free up capital to support its investment banking businesses, Diamond was immediately mentioned as a potential bidder because of Atlas Mara, the African banking acquisition vehicle he founded with Ugandan entrepreneur Ashish Thakkar in 2013.
Diamond’s team at Atlas includes CEO and executive director John Vitalo, a U.S. Marine Corps veteran who used to run Barclays’ Middle East division, and Kenroy Dowers, New York–based head of corporate development, who handles mergers and acquisitions. The British Virgin Islands–incorporated firm has made several purchases, but those familiar with Diamond’s ambitions say a deal with Barclays would be a bridge too far.
First, the bank’s African stake is worth about $6 billion, dwarfing Atlas’s $336 million market capitalization. Second, Diamond, 64, a Massachusetts native who joined Barclays in 1996 and became CEO in 2011 after serving as group president and head of corporate and investment banking, is taking a measured approach. “He might want some of the East African assets, but that doesn’t solve Barclays’ need for an exit,” says a London-based banker who has worked with Atlas.
A tilt at Barclays Africa wouldn’t fit with Atlas’s strategy, he adds. The firm is creating a cluster of banks in Botswana, Mozambique and Rwanda, and it plans to build its presence in East Africa, with an emphasis on Kenya, Tanzania and Uganda, to exploit untapped markets and a rising professional class. Just 34 percent of adults in sub-Saharan Africa have bank accounts, versus 94 percent in high-income Organization for Economic Cooperation and Development countries, the World Bank Group reports. Also, a growing number of Africans bypass traditional financial institutions by doing their banking via smartphone, a trend that established players such as Barclays Africa have proven slow to adapt to.
Besides, Atlas already has enough on its plate in Africa after spending about $500 million on acquisitions. The commodities sell-off has hit the continent hard, sending valuations through the floor. Last year Atlas boosted its stake in Union Bank of Nigeria, the country’s 11th-biggest lender by assets, to 30 percent, but UBN stock has fallen almost 37 percent over the past 12 months. “A bigger priority is to gain control of UBN,” the banker says.
Barclays’ path to an African exit is unclear, according to regional bankers. The bank is selling because, although it owns only 62 percent, a combination of U.K. and global regulations governing bank capital oblige it to hold 100 percent of the value of Barclays Africa’s capital on its books, reducing its return on equity from that division to roughly 9.6 percent from 16 percent. “Three quarters of the business is in South Africa, and investors are not comfortable with South Africa these days,” the London-based banker says.
Rather than seal an eye-catching deal, Barclays will probably try to sell down its stake on the open market. Still, it’s too early to rule out Diamond, who resigned from the bank amid public outrage over its role in the Libor scandal. Says one Africa-based banker, referring to Barclays Capital, which was a failed bond venture when Diamond arrived at the firm: “It’s nearly impossible, but Bob has done the nearly impossible before.”
