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RMB Holdings to give shareholders its R130bn FirstRand stake

Deal unwinds complex ownership structure.

Shares in South Africa‘s FirstRand fell more than 4% in early Wednesday trade after its top investor, RMB Holdings (RMH), announced plans to distribute its roughly R130 billion stake in the bank to its shareholders.

RMH’s shares, meanwhile, rose almost 5%.

Wednesday’s market open was the first opportunity for investors to trade in FirstRand shares after RMH, an investment firm that spawned the bank, announced its plans late on Tuesday.

The move will see FirstRand, which runs South Africa‘s largest retail bank, split from its parent and original founders, prominent businessmen who via firms like RMH have played a role in the rise of a number of now major companies, many in financial services.

While it is designed to unlock value for RMH shareholders, FirstRand shares fell on the prospect that some RMH investors might decide to sell the stock rather than hold into it.

RMH CEO Herman Bosman told Reuters on Wednesday that unbundling the stake, bringing a more than two-decade relationship to an end, could unlock between 10 billion rand and 20 billion rand of value for its shareholders trapped in its current structure.

RMH shares trade at a discount of between 8% and 12% to its investment portfolio, of which its 34% stake in FirstRand is its most significant asset, he said, adding initially the firm thought this was an aberration, but it has persisted and is unlikely to reduce.

“On the one hand you’ve got 15 billion of unlocked value … and you weigh that up against the benefits of the structure,” he said in an interview.

“Given the size and maturity and the stage of development (of FirstRand), the value add that we do bring is not commensurate with the opportunity cost.”

In a related transaction, Remgro, which holds 28% of RMH and 4% of FirstRand, said it would distribute its stakes in both to its shareholders. Remgro shares were up 5.4%.

FirstRand and Remgro issued statements on Tuesday advising investors to exercise caution when dealing in their stock.

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Investec claimed in the Pretoria High Court, against the Randgold minority shareholders that they had no right (locus standi), as beneficial shareholders – if the shares were held by the nominees! More than 85 % of shares traded in SA are held by the nominees -FNB beneficial shareholders beware – get those shares transferred into your name! Ask me – I was there!

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