South Africa

Investec unbundling a windfall

JOHANNESBURG – Investec Asset Management (IAM) senior management are set to receive a windfall after parent Investec on Friday said it would unbundle its asset management division and list it in London with an inward listing on the local bourse.

The spin-off was expected to be completed within the next 12 months.

Investec’s shares on Friday closed 9.8 percent higher on the JSE at R103.29.

Five years ago, the group agreed to sell 15 percent of its asset management unit to its staff at a price that at the time valued the business at £1.2 billion (R23.4bn). The deal was done through a trust structure in which each employee owns a portion of the underlying trust assets.

IAM’s chief executive, Hendrik du Toit, and IAM’s chief operating officer and chief financial officer, Kim McFarland, are participants in the trust.

The news also came on the eve of Fani Titi and Hendrik du Toit assuming their role as joint chief executive of the group next month. McFarland will also become an executive director of the group board on October 1.

Titi and Du Toit said the proposed demerger and listing of IAM provides the simplicity of structure and focus to enhance the long-term prospects of IAM. 

“We look forward to working closely as joint group chief executives during this phase of our evolution and to implement this transaction which we expect will create significant shareholder value over time,” the two said.

Structure and composition

Following the implementation of the unbundling, Titi will lead the remaining group, while Du Toit will lead the asset management unit. The group said the structure and composition of the boards of both Investec and the demerged unit would be decided in due course.

The IAM business has £109bn of assets under management and has grown at an annual 13.7 percent over the past 10 financial years. The IAM contributed 29.3 percent to Investec’s profit in the year ended March. The performance of the unit in the period saw Du Toit awarded a bonus of £5.6 million.

“Hendrik du Toit has always wanted this. He did sell 15 percent of the business a few years ago to staff. The news will be greatly welcomed by asset management staff,” said Wayne McCurrie from FNB Wealth and Investments.

Investec shareholders will receive shares in IAM in addition to their holding in the bank, which following the demerger will comprise wealth management and speciality banking.

Investec outgoing chief executive Stephen Koseff said the time was right to demerge and list its asset management business to support it in the next phase of its development.

“We believe the transaction will allow these businesses to fulfil their full potential and shareholders will benefit from future value creation through direct ownership of two separately listed companies,” Koseff said.

The group in 2002 implemented a dual-listed company structure with listings on the London Stock Exchange and JSE. On Friday the company said its combined current market capitalisation was £4.9bn.

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