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Standard Bank makes offer to purchase 100% of Liberty Holdings

Both companies have ‘just gone long on South Africa…and we are inspiring our people, both our staff and our clients, to do the same’: Standard Bank CEO Sim Tshabalala with Liberty Holdings CEO David Munro.

FIFI PETERS: Shares of Liberty soared more than 30% on the JSE earlier today (July 15, 2021) after Standard Bank announced it was buying the rest of the business that it didn’t already own. I’m now joined by both parties involved in that deal. They are Sim Tshabalala, group CEO of Standard Bank, and David Munro, Liberty CEO. Gentlemen, welcome to the show.

DAVID MUNRO: Thank you so much.

SIM TSHABALALA: Thank you very much, Fifi.

FIFI PETERS: Sim, let me begin with you because you have said that this merger was inevitable. Considering the pre-existing relationship Standard Bank had with Liberty  – perhaps merger is not the right word here, you are just buying the rest of the business you don’t own – when did talks begin?

SIM TSHABALALA: Fifi, he discussions around this relationship have been ongoing since the days of Donny Gordon, to be frank with you. David speaks very eloquently about this and I’ll let him embellish on it. We’ve always had the imperative need to reflect on the nature of the relationship, which is a shareholding – 54% –  but importantly, with an arm’s-length bancassurance agreement, which requires constant discussion. So there are forums in both companies, as well as the joint forum where people are constantly talking about meeting clients’ needs, the products to be sold and so forth and, at a board level, a constant reflection on really what’s in the best interest of our clients, the policy holders, the shareholders, and indeed South African society; and what’s the best way to face off to the clients but also to the competition. And so it’s been an ongoing discussion about what’s best to do, which obviously has accelerated in the recent past.

FIFI PETERS: Ongoing how long, David? Perhaps you can give us the exact timelines of these discussions and why now was a good time to go ahead with this deal.

DAVID MUNRO: Fifi, that’s right. I mean, this is a very formal process, actually. Sim is absolutely right. The relationship that these two institutions have that our founder, Donald Gordon, referred to in 1999, when he retired as the chairman. He said this is a special relationship. He had spoken about it in his farewell speech. He spoke about when Andre de Villiers joined his board in 1974, and he joined the Standard Bank Group board. He spoke about it as a special relationship in the past, but he also acknowledged that this special relationship would evolve over time.

But you can’t just sort of mooch into a transaction like we’ve announced today. It was about 2.5-odd months ago that Sim formally approached our board to enter into a discussion. That required us to constitute an independent board, which we did. We then commenced the process of engagement, and it is that engagement – which is a very formal, very rigorous and, given the related-party nature and the existing shareholding – that we took very seriously. I think Sim and I both ended up a bit bruised by this. But nevertheless we were looking after our respective stakeholders’ interests, and it culminated in the announcement that we made today.

SIM TSHABALALA: I just wanted to add on the question of timing on the question of the arm’s length and the bruising nature of the discussions. I think a couple of quick points. The first one is from our perspective fishy. This is not an opportunistic transaction because, as I said to you, the full integration of Liberty together with Standard Bank’s asset management, banking and short-term insurance businesses is completely aligned with both companies’ strategies.

Secondly, we want to simplify our group and that simplification has been on the go for a number of years. You’ll recall we divested of our interests in international operations, and focused on the African continent. It’s been important for us to realign the group structure. So this is a next step in the realignment of the group structure.

But from a Liberty and a Standard Bank perspective, the transaction helps us to respond to our clients and the competitive environment.

And lastly, on the issue of the negotiations, our offer represents a 40% premium on the 30-day view app, which is definitely above the average broker target prices. And it was at arm’s length, each party trying to extract the best bargain for the interested parties there. We got to a point where we could get to “yes”, with the Liberty board and then the Standard Bank board agreeing, and we were in a position to announce as we did today.

FIFI PETERS: Congratulations. You were talking about the 40% premium in terms of the offer price. I think that the market was really baking it into Liberty’s shares in terms of the performance today.

But David, what does this deal mean for Liberty workers?

DAVID MUNRO: You characterise it exactly. Our shareholders get a transaction which they must now take away and vote on the scheme. But for Liberty, the business, I think this is a massive vote of confidence by the Standard Bank Group in the client franchise of Liberty, the advisor force that Liberty has, the Liberty advisory partners, our financial advisors and the staff and leadership team of Liberty. We know how to run an insurance company and an asset-management business combined – those two big established successful businesses – with Sim’s existing banking and short-term insurance operations. He also has a private-client asset management business.

He’s suddenly put together an extraordinary combination of well-established players in every segment of what is required in financial services. I think it creates a formidable competitor, and therefore it’s a tremendous opportunity for everybody at Liberty because we’re moving into a place where we can grow faster. This is about growth. This isn’t about synergies where there are big duplications and overlaps, and we are trying to extract efficiencies.

FIFI PETERS: Often in these transactions, where you’ve got this coming together of parties in the bigger umbrella, there are concerns on the ground among the workers within your operations, particularly for Liberty workers, as to the security of the jobs. So Sim, perhaps add a bit of colour there. As a Liberty worker should I be worried? And ultimately if I’m a client how does this benefit me?

SIM TSHABALALA: Fifi, firstly, if you’re a Liberty worker, absolutely no fear, because the transaction is predicated on the strategic imperatives that David just described to you. We’ve said that in public, and we’ve said to the Liberty staff that their skills, their knowledge, their talent, their acumen is actually complementary to the Standard Bank short-term insurance, asset management and banking capabilities.

This is not a transaction where you are dependent on, as David says, extracting efficiencies for the transaction to make sense. We can say that with confidence the workers’ jobs are intact. In fact, the large portions of the sales force of Liberty I’ve described in certain instances as actually the jewel in the crown. If you take that sales capability with a Standard Bank installed capacity in distribution, with physical distribution and that electronic distribution, and then all of a sudden you’ve got something special. So the Liberty worker has nothing to fear from this transaction, and in fact should be excited because it provides greater sales capability. It provides exciting prospects, access to more capital growth, both in South Africa and on the African continent; for the actuaries the ability for them to take the data and the knowledge that they’ve gotten applied to the Standard Bank opportunity, I think is a massive opportunity for them.

A quick one on the client. You as a client want a seamless offering when you want to pay, to invest, to insure your property, your assets, to insure your home, when you want to save, invest, preserve your wealth, pass it on to future generations. You want that to happen in a seamless way as cheaply as is reasonably practical so that you can create value and preserve it for your family. This type of arrangement provides you with that.

And then for the policy holder, my word, you are now part of an organisation that is more capitalised, the most highly capitalised company on the continent with a fortress balance sheet. Of course it’s in your best interest.

FIFI PETERS: Your shareholders probably will be sold by this. The Reserve Bank, I understand, and the competition authorities still need to give it their stamp of approval. But if it does get over the finish line, it will involve Liberty delisting or saying goodbye to the JSE, which leads me to my next question, David, what will your future role be?

DAVID MUNRO: My role is to be the chief executive of Liberty, Fifi. I take that responsibility incredibly seriously. We’ve just announced the transaction. We’ve got a business to run. We’ve got huge responsibilities to our clients, financial advisors, employees. It’s very complex to execute a transaction like this, and that is my sole focus. This is what I do. It’s a nice big question, but it’s a very decisive answer. I’m the chief executive of Liberty.

FIFI PETERS: So your job is still safe.

Before I let you go, I really need to get your thoughts on the current situation happening in South Africa and your thoughts on how we rebuild from here as a country going forward. Sim?

SIM TSHABALALA: The damage to physical infrastructure, just speaking as a bank, has been extraordinary. We’ve had over 190 branches, close to 200 branches, closed countrywide. We’ve had 33 of our branches vandalised and damaged. We’ve had 220 ATMs damaged, vandalised. We’ve had people traumatised. The human impact, both physical and psychological, is incalculable. It’ll take a long time, I think, to recover from that.

However, let me just say something Dave and I have been saying, okay? That is, our job as business is to argue strenuously for the rule of law, because the rule of law is the cornerstone of our ability to sell our products, to enter into contracts like the one we’ve just been speaking about, and to hold people accountable on those contracts – and to make sure that criminal conduct is dealt within that context.

So it is important that you reinforce. It is important that order be reinstated, and it is important that structural reforms be effected so that we can have more inclusive growth in our country. Our transaction in my view is something that ought to give people hope because we as corporates, or certainly we as the leaders, recognise that we are all scared. We fear, but it’s the conquering of fear that is important. You conquer fear by having hope, and you have hope by looking into the long term. So we see through the volatility and we believe in South Africa; we’ve just gone long on South Africa between Liberty and Standard Bank, and we are inspiring our people, both our staff and our clients, to do the same.


DAVID MUNRO: It’s a tragic set of circumstances that our country faces. We’ve been through the most incredible 15 or 18 months of this pandemic, with heartache and heartbreak and grief and trauma in every family and friendship group – you name it. And to have this now imposed on us is a massive blow. It’s just extraordinary, actually.

But I go back to the same comments that Sim makes, and I really implore the authorities to step up and to make sure that the rule of law is applied. This is a constitutional democracy where many, many people fought for the rule of law and for justice, to be treated fairly and that their rights would be upheld. What we’ve seen in the last few days has been appalling. So it is critical that we restore law and order, that we open the arteries through which the lifeblood of this country flows – the N3, the Durban port. We have to move fast, we have to deploy the security forces to get that done. And we’ve we got to do it as fast as we can.

But I’ll leave you on this note, Fifi, which is this. Any person, anybody, any of us who has have been subjected to criminal behaviour, criminal activity or personal injustice, should know that you should never let the perpetrators of that injustice or that criminal act steal your dignity and your sense of purpose. And for all of us who are citizens of this country, as tough as it is we’ve got to step forward and we’ve got to start rebuilding. We’ve got to make sure that we do not let these criminals and these criminal events overshadow our desire to build a country that is a great place to live for everybody. And we should acknowledge, in that earnest resolve that we should have, that the images we see reflect people’s desperation as much as they reflect criminality. There are many desperate people who absolutely have to find jobs, find a way to earn a living, put bread and food on the table – and we’ve got to work together for everyone. This is a tough story, but we’ve got to have resolve to move forward and not to lose our purpose and not let this take our dignity away.

FIFI PETERS: Gentlemen, thank you for those words. We’ll leave it there. Sim Tshabalala, group CEO of Standard Bank, and David Munro, CEO of Liberty.


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