RMB Holdings (RMH) shares traded 97% lower on Wednesday following the unbundling of its FirstRand stake to shareholders. The FirstRand (FSR) shares will be distributed to shareholders in the ratio of 1.31189 FSR shares for every RMH share held as at yesterday.
This meant shares opened at R1.39 on Wednesday morning, after Tuesday’s R51.04 close.
The unbundling was first announced in November and is described by the group as “a natural evolution in the 27-year association between RMH, the Founders and FirstRand and the appropriate next chapter for a business as mature, established and independent as FirstRand.”
It must be noted that RMB Private Bank and RMB, the corporate and investment bank, are both units of FirstRand, not of RMB Holdings.
The first step in this unbundling was the unbundling of Remgro’s 28% stake in RMH to its shareholders. This happened on June 2, with the effect being that after Wednesday (today), Remgro shareholders now own FirstRand directly.
RMH originally provided a way for shareholders to invest along with the financial services group’s co-founders, Laurie Dippenaar, GT Ferreira and Paul Harris.
In 2011, the decision was made to separately list the group’s insurance assets as RMI. This comprised the 25% interest in Discovery, 27.3% stake in Momentum Metropolitan Holdings, 89% of unlisted OUTsurance.
RMI then subsequently acquired 29.9% of UK insurer Hastings, built out an investment manager and acquired a portfolio of fintech businesses. Following the RMI listing, it held as its only asset the FirstRand stake.
This changed in 2016, when RMH acquired a 25.01% stake in property developer Atterbury. The new strategy at that time was to expand beyond its stake in FirstRand and create a “property investment business”. The plan was to focus on an unlisted portfolio and “acquire stakes across multiple strategies, sub-sectors and geographies in time”. It did a number of transactions following the Atterbury acquisition.
The property portfolio was never really valued by the market which saw RMH as nothing more than a proxy for FirstRand. And, as with most investment holding companies, the discount to intrinsic value has widened in recent years, which helped RMH make the decision to unbundle the FirstRand stake.
Post this unbundling (FirstRand shares should reflect in participating holders trading accounts by Monday), RMH will remain listed with RMH Property as its sole remaining asset. Importantly, RMH Property does not own any physical properties and is not classified as a real estate investment trust (Reit).
RMH Property has four main investments:
- The stake in Atterbury Property Holdings, since increased to 27.5%. This business has a portfolio of retail, commercial and industrial properties in South Africa, Namibia and Mauritius;
- A 37.5% stake in Atterbury Europe, with retail and commercial properties in Romania, Serbia and Cyprus;
- A 20.3% stake in Divercity, an “urban renewal property business focused on regeneration of South African cities”; and
- A number of stakes in Integer Properties funds. Integer is a “specialist mezzanine debt and equity lender” which partners “with reputable developers and investors”.
|Asset||Attributable value as at December 31, 2020|
|Atterbury Europe||R2.692 billion|
|Integer Properties||R116 million|
These values will have no doubt been affected by the Covid-19 pandemic and related lockdowns across the world. In a presentation to investors, RMH notes that “the exact impact on the RMHP portfolio in the near-term cannot be accurately forecasted at this stage”.
As at April 20, based on the historical values disclosed above, RMH says the intrinsic value per share of RMH Property is R3.33.
It says that the valuation of the portfolio “is complicated due to the unlisted, development focused nature of the underlying businesses” and that “no adjustments have been made as yet to these valuations to reflect the impact of Covid-19”.
Beyond the short-term impact of Covid-19, RMH Property says it will “continue to manage its existing investment portfolio that is anchored by the partnership with the Atterbury Group”. It does not “currently receive dividends from its portfolio companies and only expects to do so once the capital structures of its portfolio companies are sufficiently de-leveraged over the next three to five years”. Also, it does not expect “to provide any further capital into any of its portfolio companies”.
RMH says its board will “continue to assess options to monetise the RMH Property business, in an orderly manner over time, and to return maximum value to shareholders”. These options include separate listings of the underlying companies as well as disposals.