Rand Merchant of S. Africa to unbundle stake in insurers, considers rights issue


The logos of the companies Rand Merchant Bank, FNB, Wesbank and Ashburton Investments can be seen outside the offices of FirstRand in Cape Town, South Africa on March 11, 2019. REUTERS / Mike Hutchings / File Photo

JOHANNESBURG, Sep 20 (Reuters) – South African financial services holding company Rand Merchant Investment (RMIJ.J) on Monday said it would unbundle its stake in two large local insurers and carry out a rights issue to lower the haircut between its share price and its book value.

Rand Merchant Investment and several other large South African companies have stakes in other publicly traded companies, which often results in their shares trading below their book value.

The restructuring of RMI will help, among other things, “unlock significant shareholder value through a reduction in the discount at which RMI is currently trading relative to its underlying intrinsic value,” the company said in a statement.

As part of the restructuring, RMI will unbundle all of its interests in two major life insurers Discovery Ltd (DSYJ.J) and Momentum Metropolitan Holdings (MTMJ.J) and distribute them to RMI shareholders.

The overhaul of the company’s structure would also involve a rights issue of 6.5 billion rand ($ 438.26 million) which will help it “optimize RMI’s capital structure,” he said. .

As the company’s stake in Discovery and Momentum served as collateral for its debt, the proceeds from the rights issue will be used to reduce RMI’s gross debt of R11.8 billion to a “more proportionate level.” to the asset base and expected dividend stream from the remaining assets, ”he said.

He did not specify what his final debt level would be after the rights issue.

($ 1 = Rand 14.8314)

Report by Promit Mukherjee. Editing by Jane Merriman

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