Roy Cokayne
LISTED transport and mobility group Imperial Holdings is looking to sell its interest in Regent Insurance Company and Regent Life Assurance Company to the Hollard Insurance Group.
Imperial said yesterday it had entered into exclusive negotiations with the Hollard Insurance Group about the sale of these businesses.
The group said that the exclusivity period for the negotiations was three months and shareholders would be advised as soon as the parties either terminated negotiations or intended to seek the required governance and regulatory approvals.
Revenue growth
The Regent business and Liquid Capital form the major part of Imperial’s financial services division, with Regent selling regulated insurance products and Liquid Capital unregulated products.
The financial division in the six months to December reported a 6 percent growth in revenue to R2.2 billion, which accounts for about 4 percent of the Imperial group’s total revenue. The operating profit of the financial services division declined by 6 percent to R500 million in the same period and accounted for 17 percent of group operating profit.
Explaining the rationale for the proposed disposal, Imperial said that the Regent business consisted of long- and short-term licences in South Africa, Botswana and Lesotho covering both motor-related insurance and a number of non-motor areas.
Imperial said that while the business of Regent had grown strongly since its establishment, a large fast-growing portion of its revenue and profits were unrelated to the group’s core vehicle and logistics businesses and enjoyed no strategic, competitive or financial advantage from Imperial’s ownership.
Expansion
“The growth prospects and value of these unrelated businesses will be better advanced by owners with established capability and scale in financial services and insurance,” it said.
“Therefore, and consistent with its espoused strategy to invest in its core capabilities, Imperial has decided to dispose of the business and insurance licences of Regent, in a transaction structured to allow the group continued access to the income flows generated by the distribution of vehicle-related insurance and value-added products, through Imperial’s extensive dealership network,” the company said.
Imperial said the proceeds from the proposed transaction would be invested in due course into the expansion of the group’s core businesses while initially reducing short-term debt.
The proposed disposal is in line with comments made in February by Imperial chief executive Mark Lamberti that the group had embarked on a process to dispose of certain underperforming assets.
Lamberti at the time said the group would be disposing of strategically misaligned, under-performing, sub-scale or low return on effort assets to increase Imperial’s return on capital and effort.
Imperial shares on the JSE dropped 1.61 percent yesterday to close trade at R183.