Alexander forbes offices in Sandton South Africa.Photo by Simphiwe Mbokazi 1

Johannesburg - Specialised financial services group Alexander Forbes is planning to return to the JSE main board by the end of next month.

It will also sell 34 percent stake of its business to Mercer Africa Limited, a wholly owned subsidiary of US insurer Marsh & McLennan Companies.

Alexander Forbes announced its intentions to relist last month as its private equity (PE) owners wanted to dispose of their investment in the group.

When the company made the announcement then, it said it was exploring various (options) including sale of the business.

But yesterday it said it opted for relisting as this would enable it to keep the current structure and personnel of the group while granting it access to the capital markets as well.

The group chief executive, Edward Kieswetter, said it was not because of the lack of good offers it had received but that the shareholders felt it would better maximise value as it would enhance the company’s profile.

“The offers we had were great. We were blessed with two good options and we are delighted that shareholders went with the listing because it will create an opportunity for the company to retain its current profile.”

The group, however, explored the sale option by agreeing to sell 34 percent of shares held by selling shareholders to Marsh’s unit, Mercer. The two companies have had a strategic relationship since 2011 when Marsh acquired 100 percent of Alexander Forbes Risk Services.

Kieswetter said all Alexander Forbes’ PE investors had indicated an intention to disinvest in the company and the group felt that the stock exchange provided an orderly platform for them to trade their shares with institutional investors.

Jean Pierre Verster, an analyst at 36ONE Asset Management, said this exit was to be expected as PE investors always have planned dates to exit any investments they get into. When Alexander Forbes lists it would also issue new shares but only to institutional investors. The value of the new shares would be determined next month by the group’s underwriters.

Alexander Forbes first listed on the JSE in 1996 but exited in 2007 when it was bought by a consortium of PE investors. A 26.5 percent share of the company remained listed on the JSE as Alexander Forbes Preference Share Investments. This has been a special purpose investment vehicle for the group’s existing shareholders before the PE buyout.

The price of these shares closed at R9.50 on Friday but yesterday the share price declined as much as 7.37 percent to close at R8.80 after the announcement.

Verster said the share price reaction of the special purpose vehicle Alexander Forbes Preference Investments indicated a slight disappointment from the market as it had expected that if the whole of Alexander Forbes was sold to Marsh, the shareholders would receive a premium.

“The expectation was that if the whole company had been sold to Marsh, the price would have been better. But now only 34 percent will be sold to Marsh,” he said.

But Verster said the group was evidently ready for the listing as it has spent a couple of years restructuring and preparing for a possible return to the JSE.

In the past seven years, Alexander Forbes disposed of a number of its investments. In March this year, it completed reorganisation and restructure of its balance sheet which Kieswetter said put the group in a simplified and more flexible financial position. - Business Report