Firstrand's bid to take over Aldermore received a major boost after the group said it would recommend that shareholders accept the R2bn cash offer.

JOHANNESBURG - FirstRand's bid to take over UK-listed Aldermore received a major boost yesterday when the group said it would recommend that its shareholders accept the R2 billion cash offer from Africa’s biggest lender by market value.

FirstRand chief executive Johan Burger said the recommendation would breach a major hurdle in the bid.

Burger said: “This transaction is the latest step in FirstRand’s strategy of protecting and building shareholder value by achieving a more diversified revenue profile and we believe it will provide the platform to fulfil our growth objectives in the UK.”

FirstRand offered 313 per pence per share, valuing the UK specialist lender to £1.1 billion. The offer  represented a premium of 22 percent to Aldermore’s closing price on the day in which the the transaction was first announced in October.

FirstRand said their strategy was to achieve a more diversified revenue profile across products, segments and geographies.

Currently, it said 4 percent of their earnings was generated by the group’s UK business MotoNovo, one of the largest providers of motor finance for second-hand vehicles in the European country.

Burger said the offer would allow FirstRand to locate more financial resources to their operations in Africa, whilst diversifying earnings in the UK.

FirstRand said it recognised Aldermore’s existing management team had a deep understanding of the business environment in which the firm operated.

“MotoNovo, which has built a meaningful market share in financing second hand vehicles and is organically building a more diversified product set, including personal loans and insurance, will be integrated within Aldermore to form a separate pillar. Phillip Monks, Aldermore’s chief executive will lead the new combined UK business,” FirstRand said in a statement.

The financial institution, which is part of the big four banks in South Africa, said it would work closely with Aldermore management team to identify growth opportunities that Aldermore could explore under FirstRand’s ownership.

“FirstRand already sees the potential to broaden the business model of the combined platform. FirstRand also believes further UK growth can be unlocked through (a) cross-selling the current product offerings across the MotoNovo and Aldermore customer bases and (b) in the longer term, developing further financial services offerings.”
Burger said Aldermore, which was founded in 2009 by a former Barclays executive with backing from private equity firm AnaCap, provided an ideal opportunity for FirstRand’s expansion strategy.

“Aldermore, under the leadership of Phillip Monks, joins our multi-branded portfolio of leading financial services franchises; First National Bank, Rand Merchant Bank, WesBank and Ashburton Investments. FirstRand's unique operating model and organisational culture empowers the management teams of these franchises to formulate and execute on their respective growth plans within the group’s strategic framework. This approach has resulted in a track record of superior growth and returns,” said Burger.

“We are very comfortable that the financial impact of this transaction is supportive of FirstRand’s previous guidance to shareholders on growth, returns, capital position and dividend policy.”

FirstRand shares rose 0.76 percent on the JSE yesterday to close at R52,79.