Barclays has confirmed a full-scale return to South Africa after revealing it would pay £2.9 billion for a 60 per cent stake in Absa.
The bank, which pulled out of the country 18 years ago amid protests from anti- apartheid groups, said the deal was the largest foreign direct investment in South Africa.
Johannesburg- based Absa, which employs 31,000 staff, had 6.1 million personal banking customers at the end of September, served by 668 full and subsidiary outlets and more than 4,500 ATM machines.
Chief executive John Varley yesterday said the deal helped " internationalise" Barclays earnings and involved a country with "great growth potential". Barclays is expected to become Africa's biggest bank as a result of the deal.
Mr Varley added: "Absa is an ideal partner for Barclays. It is South Africa's leading retail bank, with a strong management team making very good returns for shareholders."
The UK group first announced in September that it was in talks about taking a major stake in the business, which recently reported a 16 per cent rise in half-year underlying earnings to 2.5 billion rand (£224 million).
The proposals from Barclays have now secured the support of Absa's board, while the South African Minister of Finance Trevor Manuel has also backed the move. Shareholders representing 63 per cent of Absa have so far expressed their support.
The price offered is higher than the £2.7 billion forecast and is at a 36 per cent premium to the Absa share price prior to interest from Barclays.
The terms of the deal - which was predicted as set for completion inThe Birmingham Post yesterday - will enable Absa to remain a publicly listed company, while the group's chairman and chief executive will stay in their jobs.
Barclays, which has some corporate banking offices in South Africa, said cost savings from the tie-up would help improve Absa's annual pretax profits by 1.4 billion rand (£123 million) in the fourth year after the completion of the deal.
Mr Manuel approved Barclays' offer, saying the potential advantages of a deal outweighed the possible risks.
Synergies from combining the two banks' businesses will increase Absa's pretax annual profit by about 1.4 billion rand four years after the deal is completed, Barclays said.
Barclays will pay 2.4 times Absa's book value and an 8.5 per cent premium to Absa's closing price on April 22, when Barclays issued a detailed intention to bid.