Investec falls on details of asset management demerger
Investec said it expected to raise about £189million (R3.58billion) from the sale of about 10percent of Investec Asset Management, which will be renamed Ninety One when it is spun off in March.
The demerger was first announced in September. Joint chief executives Fani Titi and Hendrik du Toit said in a statement on Friday that they continued to make good progress with respect to the proposed demerger and listing of Ninety One.
“We remain excited about the benefits of this transaction and are determined to drive simplification across the group, focusing on enhancing the long-term prospects of Ninety One and Investec Bank and Wealth for the benefit of all our stakeholders. “Our shareholders are set to benefit from the resulting value creation through their direct ownership of two distinct businesses, well positioned for long-term growth,” the chief executives said.
The Investec Bank and Wealth management team have committed to deliver improved returns on equity, with the Investec Bank and Wealth target of 12 to 16percent to be achieved by the financial year to end March 2022 compared to 10.7percent achieved by Investec Bank and Wealth for the six months to the end of September.
The group said on Friday that they would move to a new dual-listed company structure comprising Ninety One plc, a company incorporated in England and Wales and Ninety One Limited, a company incorporated in South Africa.
The demerger and listing of Ninety One requires shareholder approval.
The group said after the demerger 55.9percent of the total issued share capital of Ninety One plc, representing 37.7percent of the combined total issued share capital of Ninety One, would be held by Investec plc ordinary shareholders, with 53.1percent of the total issued share capital of Ninety One Limited, representing 17.3percent of the combined total issued share capital of Ninety One will be held by Investec Limited ordinary shareholders.
Du Toit will assume the role of chief executive of Ninety One, while Kim McFarland will be finance director. Gareth Penny will be Ninety One’s chairperson. For the past 12 years, he has been a non-executive director of Switzerland’s Julius Bar Group. He is also chairperson of nickel and palladium producer Norilsk Nickel and was previously chief executive of Anglo American unit De Beers.
The lender is expected to incur transaction costs of at least £56m, which will be covered by the proceeds of the share sale, in addition to any tax liabilities arising from the transaction. The remainder will be used to strengthen Investec’s capital position and support its growth plans, the company said.
Jordan Weir, a trader at Citadel, said in all likelihood the share price drop could be attributed to a knee-jerk reaction by the market to the news released upon the opening of trade.
“However, the stock did gradually claw back some of the early correction throughout the trading day,” Weir said.“The demerger will benefit the group and its shareholders.
“It will drive growth in the medium term through the leveraging of the group’s investment in their UK private bank, and this would be followed by improved cost management by way of heightened sectional-transparency of different divisions. And lastly it will allow for greater ability to expand the business through connectivity when assessing the banking and wealth management divisions globally,” Weir said.
“Overall, shareholders will benefit from more transparent cost management, while gaining the ability to potentially enjoy the fruits of a strategic spin-off which focuses on efficiency and sustainability of growth going forward,” he said.
“Clearly there are some headwinds in this sector in terms of the move from active to passive management,” said a source familiar with the demerger.
Investec shares closed 1.80percent lower at R84.21 on the JSE on Friday. Additional reporting by Reuters