JPMorgan Chase & Co., which has slid down South Africa’s equity sales rankings for the past six years, has hired bankers from Morgan Stanley and sent staff from Geneva and London to Johannesburg to regain the top spot.
“We want to be in a top-tier position in any business,” said John Coulter, 49, chief executive officer of JPMorgan’s Johannesburg-based sub-Saharan Africa unit. “We lost critical mass with people leaving and the financial crisis” and “had become too isolated from a local perspective.”
After leading equity league tables of Africa’s largest economy between 2001 and 2004, JPMorgan slipped every year to eighth this year. The decline began when Coulter, with six years at the helm and 20 years at the company, left JPMorgan in 2005. He spent 16 months as CEO of private-equity firm, Brait SA, and did a stint as head of Morgan Stanley’s South African unit from January 2008, before returning to JPMorgan in May last year.
Morgan Stanley’s equity team in South Africa, boosted by its tie-up with FirstRand Ltd.’s Rand Merchant Bank, has led the country’s equity league table for the past three years. The venture, called RMB Morgan Stanley, has participated in five deals this year for a 40 percent share of the market, including AngloGold Ashanti Ltd.’s September sale of $789 million of stock and Remgro Ltd.’s sale of its stake in Nampak Ltd.
“It’s a class act,” Coulter said of RMB Morgan Stanley’s success since it started in September 2006. “We’re aiming to do it without partnering with a local company. But clearly things can change.”
JPMorgan in Johannesburg has been joined by Ian Balfour, who moved from its private bank in Geneva to be head of markets, sales and trading, and Tom Briggs, who joined from JPMorgan in London as treasurer, according to Coulter.
In July, JPMorgan hired Damian Dolland and Sean Jagoe, both previously from Morgan Stanley, as head of investment banking for sub-Saharan Africa excluding South Africa, and senior adviser and member of JPMorgan’s European Advisory Committee, respectively. It also took over the investment banking team of Fidelis Partners, a business started by Jagoe.
Coulter, born in Zambia, is rebuilding as rivals step up efforts to benefit from economic growth in Africa, which, according to the International Monetary Fund, will outpace that of developed markets. This year, in its only equity underwriting deal, JPMorgan shared in the listing of Optimum Coal Holdings Ltd. on Johannesburg’s stock exchange in March with RMB Morgan Stanley, according to Bloomberg data.
“I would be sceptical of how much market share can be taken in this environment,” said Neville Chester, who helps manage about $29 billion at Coronation Fund Managers Ltd.
With Citigroup Inc., Bank of America’s Merrill Lynch, Deutsche Bank AG, Goldman Sachs Group Inc., South Africa’s five largest banks and smaller advisers in the market, it feels “over-brokered,” RMB Morgan Stanley CEO Chris Meyer said.
While most have a broader strategy in a continent with more than 1 billion people, many “cut their teeth” in South Africa, Meyer said. RMB Morgan Stanley will fight for what could be next year’s largest initial public offering in South Africa, the listing of Old Mutual Investment Group Property Investment’s Triangle Core Real Estate Fund, which may raise 5 billion rand ($726 million) and have a market value of 12 billion rand.
“I don’t think competitors will beat us this year,” Meyer said.
Credit Suisse AG in September ended a venture with Standard Bank Group Ltd. to start its own brokerage, while Renaissance Capital bought Barnard Jacobs Mellet Holdings Ltd. in June.
“The changes with Credit Suisse Standard Securities may be a hiring opportunity, but it’s also a further squeeze on already tight resources in the local market because one institution becomes two,” Coulter said.
Investment banks, including RMB Morgan Stanley and JPMorgan, are counting on the return of stocks removed from the South African bourse after private equity buyouts.
Boston-based Bain Capital LLC bought Edgars Consolidated Stores Ltd. for 25 billion rand in 2007 in the country’s biggest leveraged buyout. Other companies delisted in the past five years through buyouts include Alexander Forbes Ltd., Primedia Ltd. and Consol Ltd., South Africa’s largest glassmaker.
There’ll be enough initial public offers and acquisitions in South Africa to keep investment bankers happy as long as the market keeps being “aided by more offshore interest,” Stephen Meintjes, head of research at Imara SP Reid, said.
Up for Sale
Since July, Old Mutual Plc has indicated its Nedbank Group Ltd. unit is up for sale, while Japan’s Nippon Telegraph & Telephone Corp. bought technology company Dimension Data Plc and Wal-Mart Stores Inc. said it wants to buy a controlling stake in retailer Massmart Holdings Ltd.
Having suffered during the financial crisis and losing five staff in 2006 to the now defunct Credit Suisse-Standard Bank venture, JPMorgan employs about 450 people in South Africa, including its money manager-administration company in Cape Town.
Standard Bank, Gold Fields Ltd., insurer Liberty Holdings Ltd. and Africa’s largest fixed-line operator, Telkom SA Ltd., make up part of Coulter’s list of past clients in South Africa.
With the extra bankers, JPMorgan will be “well placed for 2011,” Coulter said. “This is a market set for increasing investment both by existing players and a number of additional new participants.”