RMB Holdings Ltd. agreed to buy FirstRand Ltd.’s stake in South African property and casualty insurer OUTsurance for 3.75 billion rand ($550 million) as part of a plan to split its insurance and banking businesses.
RMBH, which now owns 30 percent of FirstRand and 45 percent of OUTsurance, will create a new insurer called Rand Merchant Insurance Holdings Ltd. that will be listed on Johannesburg’s stock exchange, the company said in a statement today.
FirstRand, which helped start OUTsurance in 1998, will use the money from the sale of its 45 percent stake to “either support further investment in the available growth opportunities or be returned to shareholders,” it said separately. FirstRand, which owns South Africa’s largest auto-loans provider and third-biggest consumer bank, is simplifying its business while targeting expansion in countries such as Nigeria, Zambia and Tanzania.
RMBH also agreed to sell a 5 percent stake in its business to Royal Bafokeng Holdings Ltd. for 2.5 billion rand, which will be used to help pay for the OUTsurance acquisition, the Johannesburg-based company said.
The series of transactions “will provide investors with greater flexibility in terms of their investment choices by giving them separate access to an enhanced portfolio of pre-eminent insurance brands, as well as a strategic investment in a premier Southern African banking group,” RMB Chief Executive Officer Peter Cooper said.
RMBH, which also owns 25 percent of Discovery Holdings Ltd., aims to raise its stake in FirstRand to 34 percent and its holding in MMI Holdings Ltd. to 24 percent from 18 percent by buying stock from Remgro Ltd. MMI, South Africa’s third-largest insurer, was formed when FirstRand unbundled its Momentum Group Ltd. and merged it with Metropolitan Holdings Ltd.
RMBH rose 1.34 rand, or 3.8 percent, to 36.94 rand at the close in Johannesburg. FirstRand gained 15 cents, or 0.8 percent, to 18.80 rand, giving the company a market value of 106 billion rand.
For Royal Bafokeng, which represents the business interests of the 300,000-strong Bafokeng community, the acquisition of a stake in RMBH will help diversify the company’s investments, which include platinum ventures in northern South Africa, the location of the world’s richest platinum geological complex.
“This investment in RMBH enables us to diversify and enhance our existing investment portfolio through significant exposure to a leading financial services group,” CEO Niall Carroll said in an e-mailed statement.
Royal Bafokeng Holdings has 30 billion rand of capital in a country where black South Africans own less than a fifth of the top 100 stocks listed on Johannesburg’s stock exchange, according to the bourse, more than 16 years since the end of apartheid. The 800-year-old community also owns stakes in Zurich Financial Services AG’s South African insurance unit and Vodacom Group Ltd.