A prescient deal
Former Liberty CEO and African Bank chair Thabo Dloti’s Sithega Financial Services finally takes a controlling share of Prescient Holdings and plans to invest in life and short-term insurers focused on the mass market
Two years after Thabo Dloti left the hot seat at Liberty, he has re-emerged as the new controlling shareholder of Prescient Holdings. It is only about two weeks since his company, Sithega Financial Services, launched its website, but the process to buy control of Prescient has taken more than a year as it needed the approval of regulators in SA, Ireland, Jersey and China. Sithega will own 75% of the Prescient Empowerment Trust, which in turn owns 56% of Prescient Holdings.
It has paid R360m for this stake, with support from a range of longterm stakeholders. These include Yellowwoods, the holding company of the Enthoven family, which controls Hollard.
Prescient has R88bn under management and R415bn under administration, a stockbroker in the equities, derivatives and fixed income markets, and a small wealth management business in Cape Town.
Dloti says Sithega will not invest in any business which competes with Prescient. But it will invest in life and short-term insurers, particularly those that distribute into the mass market. Dloti was previously head of Old Mutual Group Schemes, now called the Mass & Foundation cluster. “We can help insurers who want to make the step change into this market.”
Dloti says he believes in the Prescient investment philosophy. As a quantitative house, it focuses on risk and aims for consistency and predictability of returns for investors.
Prescient CEO Willie Venter says the aim is to preserve capital and manage the relative and absolute downside for clients.
The 49% of Prescient Holdings owned by Stellar Capital — a private equity investor until recently controlled by retail tycoon Christo Wiese — will be diluted down to a 19% pref share holding. Stellar Capital CEO Peter van Zyl says the fund disposed of its holding in fund manager Cadiz to concentrate its asset management investment in Prescient.
It will look at investing in other noncompeting financial services businesses and is disposing of its industrial holdings such as Torre Industries and Tellumat.
Prescient founders Herman Steyn and Guy Toms reduced their combined holding from 29% to 22%.
An ownership scheme has been introduced for the broader management team.
Steyn says the group has had empowerment shareholders before, in a deal it did with leading black businessmen and organisations in 2004. It aimed to refine this after it listed in 2012. But it soon got caught up in unbundling its IT business, which was part of the listed group, from its financial services operations. It delisted from the JSE in 2017 as management concluded the listing was expensive and adding little value.
But Venter says clients made it clear that they wanted the business to be black-controlled without the founders giving up day-to-day management. He says the deal achieves this object.
With Dloti and his team based in Gauteng and Prescient run from the Cape, interference will be capped.
It is a good environment for Prescient. Its quantitative management is not as cheap as a pure index approach, but much cheaper than a fundamental house such as Coronation or Investec which relies on an army of analysts to examine the dark corners of every company.
As fees become more transparent, Prescient’s lower-cost approach should help it increase its share of products such as retirement annuities and living annuities.