- After further consolidation of strategic financial sector investments, and
- Introduction of Royal Bafokeng as significant new shareholder
RMB Holdings ("RMBH") ‐ market capitalisation R43 billion ‐ holds strategic stakes in banking giant FirstRand (30%), life and health assurer Discovery Holdings (25%), direct insurer OUTsurance (45%), specialist insurer RMB‐SI (76%) and newly merged life insurer MMI Holdings (18%).
In an announcement today, RMBH proposes a far reaching restructuring of its banking and insurance interests. RMBH intends to:
Raise its investment in ‐
- FirstRand to 34% (currently 30%)
- OUTsurance to 90% (currently 45%)
- MMI Holdings to 24% (currently 18%)
- Introduce Royal Bafokeng Holdings as a significant new shareholder in RMBH through a R2,5 billion cash subscription for new RMBH shares. This will give Royal Bafokeng an approximate 5% interest in the group ; and
- Separate its banking and insurance interests through the unbundling to shareholders of a new insurance group, Rand Merchant Insurance Holdings Limited ("RMI Holdings"). RMI Holdings will own all the group's insurance interests and will be separately listed on the JSE;
The additional FirstRand and MMI shareholdings are to be acquired from the Remgro group in exchange for the issue of new RMBH and RMI Holdings shares. The OUTsurance stake will be acquired from FirstRand for a cash consideration of R3,75 billion and will be funded using the capital raised from Royal Bafokeng and debt.
Commenting on the proposed restructuring, Peter Cooper, CEO of RMBH, said "...Our investment thesis has always been that, in the longer term, strategic stakes in businesses that earn significant elements of the profit pools of their sectors will produce superior shareholder value. The transactions presented re‐affirm this. In addition they will provide investors with greater flexibility in terms of their investment choices by giving them separate access to an enhanced portfolio of pre‐eminent insurance brands, as well as a strategic investment in a premier Southern African banking group."
The issue of shares for cash to Royal Bafokeng Holdings represents an important first step for Royal Bafokeng in achieving its stated objective of building a significant interest in and alliance with, a pre‐eminent South African financial services grouping. Royal Bafokeng is a respected investment house that will enhance the BEE credentials of the underlying RMBH and RMI Holdings investee companies. Both parties view this transaction as a first step in achieving a substantially empowered financial services group of scale in South Africa and are proud that the transaction could be concluded on fully commercial terms, heralding a new age in empowerment transactions and indicating the maturing of this part of the South African economic landscape.
RMI Holdings intends, when appropriate, to seek to acquire further shares in MMI Holdings to increase its holding in MMI Holdings to between 25% and 35%. RMI Holdings' increased stake in OUTsurance will give its shareholders greater access to an investment in a direct short‐term insurer which has a strong management team, good growth prospects and superior dividend flow. RMI Holdings will facilitate a transaction allowing the OUTsurance management group an opportunity to co‐invest in the acquisition.
Chairman and co‐founder, GT Ferreira noted "...RMBH believes the restructuring is in the best interests of all shareholders and will increase investment flexibility substantially. We are creating two very exciting investment opportunities for shareholders and are very proud of our new association with Royal Bafokeng and the potential for further transactions with our new shareholders."
It is anticipated that all conditions to the transactions will be fulfilled and that they will be implemented in a series of steps during the first quarter of 2011.