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Durban - Financial services investment holding company, Rand Merchant Investment Holdings (RMI), has acquired a 29.9 percent shareholding in UK-listed short-term insurer Hastings Group Holdings (Hastings) for an aggregate cash consideration of between £487.3million (R8.37billion) and £499.5m.

If the transaction goes through RMI will become the single largest shareholder in Hastings after the acquisition.

RMI will fund the acquisition through a debt facility, which will be fully-underwritten by Rand Merchant Bank, a division of FirstRand Bank.

“The opportunity for collaboration and shared learnings between our current insurance investment OUTsurance and Hastings is also a significant enhancement to the overall investment proposition,” said Herman Bosman, the chief executive of RMI.

Hastings enhances the geographic diversification of RMI’s portfolio into the large and competitive UK short-term insurance market.

The acquisition meets RMI’s goal of adding a significant traditional financial services business in partnership with a high quality and entrepreneurial management team as a fourth pillar alongside Discovery, MMI Holdings and OUTsurance Holdings.

Excited

“We are excited about this key next step in our evolution as Hastings fulfils both our strategy to expand and diversify our existing portfolio through the addition of a fourth pillar, while also being consistent with our investment mandate and style which focuses on high-quality companies offering long-term growth prospects,” he said.

This acquisition is in line with RMI’s previously articulated strategy that in addition to its role as an active and value-adding shareholder to the existing portfolio companies, RMI intends to optimise, diversify and modernise the investment portfolio through the addition of investments across a broad spectrum of scale and lifecycles of financial services businesses.

The acquisition is subject to regulatory approvals in South Africa, UK and Gibraltar.

It is anticipated that the transfer of the shares and payment of the acquisition consideration will occur in three tranches linked to the timing of the receipt of the specific regulatory approvals, namely from the three respective regulators.

The group said the final date for the acquisition being effective was April 30.

RMI said the final acquisition consideration of between approximately £487.3m and £499.5m would be determined with reference to a pre-agreed formula based on the timing of the completion of each tranche of the acquisition.

Hastings commenced operations in 1997 and listed on the London Stock Exchange in 2015.

It is a fast-growing agile digital general insurance provider operating principally in the UK motor market.

It provides private car and other forms of personal insurance cover (home, van and bike).

As at the end of September 2016, Hastings had a 6.4 percent share of the UK private car insurance market and just fewer than 2.3 million live customer policies (LCPs).

It has grown LCPs by 17 percent compound annual growth rate (CAGR) over the last three financial years.

The group’s success in capturing market share has been combined with consistently strong underwriting performance and growing retail profitability, with a CAGR of 21.5 percent in operating profit between 2012 and 2015.

The group has a market capitalisation of £1.46bnn (as at December 13, 2016), employs 2700 people and is headquartered in Bexhill-on-Sea with offices in Newmarket, Leicester and Gibraltar.

Collaboration

OUTsurance and Hastings have identified areas of potential collaboration that may include the sharing of best practices and learnings between the businesses, as appropriate.

Hastings chief executive Gary Hoffman said: “We welcome RMI as a shareholder and look forward to working with Herman Bosman through his board role as we continue to execute on our attractive growth strategy.

"Given this experience, Hastings will look to explore potential areas of co-operation with RMI and OUTsurance in the future that would accelerate execution of our existing strategy, including in the areas of home, data analytics, mobile propositions and operational efficiencies.”

BUSINESS REPORT ONLINE