Right concerns, wrong target
of 100% of asset manager Stanlib, the investment house formed through the 2002 merger of the old SCMB’s asset management business and Liberty Asset Management, makes sound business sense. It offers Liberty full control of a large asset manager and an extensive suite of unit trust funds, plus the con- siderable distribution channel of Standard Bank. That’s probably why 97% of Liberty’s shareholders voted in favour of the deal. So why all the fuss at the meeting to approve the R1,57bn acquisition?
Apart from what seem like valid claims of poor disclosure in the circular to shareholders, the real issue is Liberty Holdings (Libhold), the outdated pyramid structure used as a vehicle by Standard Bank to control Liberty. The bank owns 55% of Libhold, which in turn holds just over 50% of Liberty.
This structure was one of the issues raised by feisty minority shareholder Roy McAlpine, former Liberty director and former boss of Liberty Asset Management.
The pyramid holding com- pany will remain a concern that needs to be addressed. But it had little to do with the Stanlib deal, or with the board of Liberty, that nonetheless picked up lots of flak around Libhold amid suggestions that Standard Bank was really calling the shots and that the Liberty board was ineffectual.
This, not surprisingly, is seen as unfair by Liberty CEO
Bruce Hemphill: “I understand people’s frustration around Libhold, but to suggest that the Liberty board does not act in the interest of its minority shareholders and that Standard Bank calls the tune is a slight on the board.”
On poor disclosure in the circular, Hemphill concedes that on face value it perhaps could have been better. He says detailed financial statements for Stanlib were excluded, not least for competitive reasons, but that any shareholder taking a look at Liberty’s financial statements can see the effect of Stanlib. “But maybe we were unfair and placed too much onus on the retail investor.”
Another complaint by McAlpine was that the merger that formed Stanlib should never have happened in the first place. It’s a moot point, but it’s also hard to disagree that Stanlib today is very dif- ferent to the merged asset manager of five years ago. For instance, profit before tax has gone from about R100m then to R400m today.
Hemphill’s management team has only been in place since the middle of last year, so it’s unfair to suggest it dragged its feet over reversing the deal McAlpine says should never have happened. The Stanlib deal was initiated by Hemphill, who approached Standard Bank. It didn’t want to sell but could also see the sense behind the transaction, so agreed on condition Liberty shares were part of the payment, to allow the bank to retain exposure to Stanlib.
It’s also not that widely known that Standard Bank has given Liberty an undertaking to stay out of asset management and unit trusts in Africa. That adds value to the Stanlib deal.
But Libhold is not going to go away. It’s understandable that Liberty feels it’s getting unfair criticism for the control structure that it can’t control. Perhaps Standard Bank minorities need to be tested on Libhold.
A slight on his board. Bruce Hemphill