Alexander Forbes raises R3bn in IPO

Pricing the IPO at R7.5 a share.

South African pension manager Alexander Forbes priced its stock market listing in the middle of its marketed range on Friday, raising R3.7 billion in Africa’s second-largest initial public offering this year.

The pricing points to fairly strong demand when the company lists on the Johannesburg bourse next Thursday, a trader said. It values Alexander Forbes at R9.7 billion and allows a group of investors led by buyout firm Actis to exit the company at the top of the market.

London-based Actis and other private equity investors took the pension fund manager private in a R8.2 billion deal in 2007, just before the global financial crisis. Since then, South African stocks have recovered to post record highs this year.

“It is probably fair to say there’s no better time like the present to launch an IPO. The top of the equity market is what you’re looking for. That would be the exit point,” Sasha Naryshkine, a fund manager atVestact, a Johannesburg-based asset manager, said.

It will be Africa’s biggest IPO since Nigerian oil and gas company Seplat raised $540 million in a London andLagos listing in April.

Alexander Forbes, which also offers life insurance and financial planning, said it sold 496.7 million shares, including 44 million new shares issued to bolster its capital position, at R7.5 each, raising R3.7 billion.

The offer was priced in the middle of an indicated range of R6.9 to R8.05.

“The demand is going to be pretty strong because there are few life players in the market and Alexander Forbes is a quality alternative,” said Evan Giannakis, a trader at Imara SP Reid.

The total sale represents 38% of the company that was founded more than 75 years ago.

Alexander Forbes’ closest competitors for investors on the Johannesburg stock market will be health insurer Discovery Holdings and life insurer Old Mutual.

Shortly after the listing next week, Marsh & McLennan, the world’s top insurance broker, is due to become Alexander Forbes’ biggest shareholder with a 34% stake.

Marsh is due to buy the stake in two tranches at a price linked to the IPO, starting with 14.9% when Alexander Forbes’ lists and the rest shortly after.

After the 2007 buyout, about a third of the firm remained listed in a special entity called Alexander ForbesPreference Share Investments to house the holdings of some investors who did not want to sell.

Alexander Forbes said that stake, which is worth about R2.7 billion, would be spun off to existing shareholders, which include fund managers Allan Gray and Stanlib.

Shares in the special purpose entity rallied 6.02 % to R8.80 by close of trade on Friday, outpacing a 0.18% decline on the JSE All-share index.

Deutsche Bank AG, Morgan Stanley and FirstRand unit Rand Merchant Bank were the joint bookrunners on the sale.

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