PSG mulls reducing its majority shareholding in Capitec Bank
PSG said that it was considering unbundling some or all of its shares in Capitec as new laws from the Prudential Authority could lead to its holding to be defined as a conglomerate and increase its financial burden risk.
The group, which is owned by the Mouton family, said conglomerate status would substantially increase the administrative burden of its 30percent holding in the country’s largest bank by customers.
PSG said given the substantial discount at which PSG shares traded to its sum-of-the-parts value, the board believed that offloading the Capitec holding would unlock value for shareholders. Chief financial officer André du Plessis said the group had been a supporter of Capitec since inception in 2000 and valued its relationship with the bank.
“PSG Group explained its reasons for considering the potential unbundling of all or a part of their interest in Capitec to its shareholders in its cautionary this morning,” Du Plessis said.
“We understand their reasons and are comfortable with their decision of unbundling us in part or in full, or if they should decide not to proceed with their action.
"We have a good relationship with many of PSG’s shareholders, who would be the ultimate beneficiaries in the case of an unbundling and we are not aware of any reason why this should change.”
PSG Group holds a 30.7percent stake in Capitec, and the bank remains its largest investment and contributor to its recurring headline earnings.
Du Plessis said Capitec was an independent entity with its own management and strategy.
“We do not foresee a material impact on Capitec as a result of the corporate action,” he said.
Nolwandle Mthombeni, an investment analyst at Mergence Investment Managers, said the unbundling was bound to happen in the long run.
“I did expect it, but not so soon, as management had received pressure for many years around closing the holding company discount,” Mthombeni said.
She added that the main reason for buying the PSG Group shares has been for the holding in Capitec.
“Through the unbundling investors will own Capitec directly, which has performed better than PSG over the last few years,” Mthombeni said.
Capitec shares also surged by more than 9percent in the morning yesterday to R962.08, up from Tuesday’s closing price of R881.50.
Nesan Nair, a senior portfolio manager at Sasfin Securities, said the reason for the potential unbundling was the new legislation would label PSG as a financial conglomerate, making it very costly to operate with very little value.
“As we see at Remgro, the decision to unbundle these shares will potentially unlock a plus or minus 20percent discount,” Nair said.
PSG shares closed 0.04percent lower at R159.94, while Capitec shares closed 9.70percent higher at R966.99.