Three Bidvest directors on boards of banks as Joffe attacks market
IF BIDVEST SUCCEEDS in its unsolicited R1,4bn takeover bid for struggling banking minnow Mercantile, three long-serving directors – including chairman Cyril Ramaphosa – may finally need to make pivotal choices regarding the board seats they hold to avoid suggestions of conflicts of interest. Ramaphosa, along with Doug Band, serves on the boards of both Standard Bank and Bidvest, while Stephen Koseff, a director for almost 15 years, is also CEO of Investec.
Bidvest isn’t commenting further on its bid but is likely to argue the small scale of its banking operation doesn’t put it in direct competition with the rest of SA’s banking sector. It’s also likely to argue – as it has in the past, where there were potentially contentious issues – affected directors could be recused from the decisionmaking process. Bidvest has a board of 23 members: three fewer wouldn’t affect its ability to strike a quorum.
While Bidvest might protest any suggestion of conflicts of interest, there’s a growing strategic intent by the industrial behemoth to play an increasing role in financial services.
While marketing itself as a niche financial provider specialising in foreign exchange, Bidvest Bank is actually active in general banking services, and the proposed Mercantile deal is aimed at developing its ability to serve retail clients. In addition to providing foreign exchange to both retail and corporate markets it also takes fixed deposits, engages in vehicle fleet and asset finance and provides retail banking services through its outlets and growing ATM network. Mercantile has 15 branches countrywide – barely a speck in relation to the broad spread of outlets operated by the country’s Big Four banks. Nevertheless Mercantile is the latest development in Bidvest’s mounting ambition to provide a challenger brand in SA’s banking sector.
Bidvest’s 35,5c/share offer is at a premium to the pre-bid ruling price of 25c and is entirely dependent on whether 92% shareholder – Portugal’s Caixa Geral de Depósitos (Caixa) – accepts the deal. At the time of writing a response from the Caixa board was imminent.
Mercantile, as a listed entity in the South African market, has hardly covered itself in glory, seldom trading above 30c and battling to box above its weight in a market dominated by established players. An approach last year by small corporate bank Sasfin was called off by the bigger group without explanation just months after the pair signed a memorandum of understanding that made it clear Caixa might be a willing seller of its asset.
Analysts said a deal of this kind would put Bidvest Bank on a firmer competitive footing, as it would broaden its client base and product offerings. Mercantile implemented new banking systems last year, which analysts say could prove interesting to an acquirer.
This isn’t the first time Finweek has drawn attention to potential conflicts of interest on the Bidvest board with regard to its banking operation. In 2007 we highlighted the conflicts associated with the launch of Bidvest Bank out of the wholly owned Rennies franchise. Then Gill Marcus – who was on the boards of Bidvest and Absa, where she was chair – stood down. If the Mercantile deal does go ahead would it leave Ramaphosa, Band and Koseff with any other choice?
CYRIL RAMAPHOSA, DOUG BAND AND STEPHEN KOSEFF