R20bn UK deal gets thumbs-up

Aldermore shareholders vote yes, but that doesn’t mean it’s all sunshine and roses for Africa’s biggest bank

The blessing of the UK courts, and the regulatory green stamp, is all that stands between Africa’s largest bank by market value, the Jselisted Firstrand, and popping the champagne cork on its biggest overseas foray — the R20bn takeover of British high-street bank Aldermore.

In recent days, more than 95% of Aldermore’s shareholders voted to accept Firstrand’s offer of 313p/share to buy the bank — more than the 75% needed. The next step is that the UK Prudential Regulation Authority, Financial Conduct Authority and the SA Reserve Bank must put their stamps of approval on the scheme.

It’s a big deal for Firstrand and will push its overseas profits from 5% to 12% of its total.

But some analysts are wary, particularly as it follows a string of disasters from Sa-based firms going overseas to “diversify” their profits. The worst such deal was Brait’s takeover of UK high-street retailer New Look for R37bn in 2015. This ended in tears, with Brait writing down the entire business to zero this year.

However, Firstrand’s investors seem to believe the banking group’s takeover of Aldermore will be done far more judiciously. Since the deal was announced in October, the share price has gained 22% to R65.31 amid a wider resurgence of confidence in SA’S banks.

Firstrand CEO Johan Burger has been coy about his plans for Aldermore, apart from saying it will give Firstrand an opportunity to diversify the products and customers of its UK vehicle arm, Motonovo. Motonovo’s main business is to finance secondhand cars, but it has ambitious plans to provide personal loans and insurance. Aldermore’s expertise in the British small and medium-sized business sector, especially with mortgages, will help.

In the long run, the deal appears more beneficial for Firstrand’s Motonovo than for Alderoffer