FACE­BOOK MOVES ON IN­VESTEC

Finweek English Edition - - COMPANIES & INVESTMENTS -

THE US TECH­NOL­OGY gi­ant made a move into fi­nan­cial ser­vices with the ac­qui­si­tion of shares in JSE and Lon­don-listed In­vestec Plc in a deal worth R12.4bn.

The ac­qui­si­tion price placed upon the shares of In­vestec is R87.50 per share, with an upfront cash pay­ment of R70 per share, as well as two-year pref­er­ence shares worth R17.50 at 10% non- cu­mu­la­tive in­ter­est. This trans­lates into a pre­mium of 36.44% on the cur­rent share price (R64.13), and the deal has been struc­tured in such a way as to make con­tin­gent the pay­ment for pref­er­ence shares on the ful­fil­ment of agreed-upon strate­gic ob­jec­tives over the next 18 months.

RA­TIO­NALE AND STRATE­GIC IN­TENT

Face­book has iden­ti­fied five ma­jor syn­er­gies that un­der­score the value to share­hold­ers of this ac­qui­si­tion:

1. Broader ac­cess to cap­i­tal mar­kets to both en­ti­ties due to di­verse geo­graph­i­cal pro­files.

2. Ex­pan­sion of fi­nan­cial ser­vice of­fer­ings to Face­book’s on­line clients.

3. In­vestec’s ex­cel­lent man­age­rial struc­ture with proven in­ter­na­tional track record, and cul­tural fit geared to­wards cus­tomer sat­is­fac­tion and ag­gres­sive growth tar­gets.

4. The ac­qui­si­tion of a more ma­ture busi­ness with a lower P/E ra­tio will re­sult in a more stable and higher earn­ings per share (EPS) go­ing for­ward.

5. En­hanced value-adds for cur­rent ad­ver­tis­ing part­ners as Face­book will now of­fer in­te­grated fi­nan­cial

pack­ages for ad­ver­tise­ments.

THE STRATE­GIC IN­TEN­TION OF FACE­BOOK AND IN­VESTEC MOV­ING FOR­WARD IS THREE­FOLD:

1. The deal will fur­ther de­velop the Pri­vate Eq­uity func­tion of In­vestec with par­tic­u­lar fo­cus on in-house ac­qui­si­tions in the tech­nol­ogy sec­tor.

2. It will cre­ate a vir­tual cur­rency plat­form to com­pete with other of­fer­ings.

3. The op­por­tu­nity to ex­tend fi­nan­cial ser­vices prod­ucts to sup­port on­line trans­ac­tional ser­vices, on­line ad­vi­sory ser vi ces, ad­ver­tis­ing, e- com­merce struc­tures, trad­ing ve­hi­cles and gift­ing fa­cil­i­ties.

Con­cur­rently Face­book wishes to an­nounce that In­vestec Plc is in sep­a­rate ne­go­ti­a­tions re­gard­ing a po­ten­tial sale of 50.1% of its listed op­er­a­tions to Face­book within the next f i nan­cial year, ef f ec­tively re­sult­ing i n con­trol of the en­tire group by Novem­ber 2014.

THE FIN­WEEK VIEW

Sorry, we don’t see it. Out­go­ing First Na­tional Bank ( FNB) CEO Michael Jor­daan iden­ti­fied Google as a ma­jor com­peti­tor to bank­ing op­er­a­tors, but In­vestec plays i n such a dif­fer­ent mar­ket that the syn­er­gies don’t seem to hold up to scru­tiny.

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