RMB un­bundling gets the big nod


The Citizen (KZN) - - Front Page - Pa­trick Cairns

Move could make FirstRand more at­trac­tive to for­eign share­hold­ers.

The an­nounce­ment by RMB Hold­ings (RMH) that it in­tends un­bundling its 34.1% stake in FirstRand has largely been wel­comed by lo­cal as­set man­agers. The hold­ing com­pany no­ti­fied the mar­ket on Tues­day that it in­tends dis­tribut­ing this stake to share­hold­ers next year.

“I be­lieve the RMH board made the right de­ci­sion in de­cid­ing to un­bun­dle, given that the ex­ist­ing struc­ture adds no value to share­hold­ers,” says Meyrick Barker, in­vest­ment an­a­lyst at Kag­iso As­set Man­age­ment. “Since an­nounc­ing their ex­pan­sion into prop­erty, RMH has, at times, traded at up to a high teen per­cent­age dis­count to its FirstRand share­hold­ing.

“This de­ci­sion will help to un­wind the cur­rent dis­count and is pos­i­tive from the per­spec­tive of RMH share­hold­ers.”

More than 97% of RMH’s net as­set value (NAV) is at­trib­ut­able to its stake in FirstRand. The re­main­der is its R3.5 bil­lion prop­erty port­fo­lio.

The stock has there­fore largely been treated as an al­ter­na­tive en­try point into the bank­ing group. How­ever, the hold­ing com­pany dis­count at­tached to RMH has meant there is un­re­alised value.

“The re­struc­tur­ing does away with a struc­ture that was no longer nec­es­sary from RMH’s per­spec­tive,” says Vic­tor Mupunga from Old Mu­tual Wealth Pri­vate Client Se­cu­ri­ties. “De­spite the ini­tial con­cerns about an in­creased large block of trade­able shares com­ing onto the mar­ket for FirstRand, over time, it is pos­i­tive. There will be a ‘sin­gle en­try point’ for in­vestors seek­ing FirstRand ex­po­sure and in­creased free float.”

Im­pact on FirstRand

Share­hold­ers in FirstRand have also wel­comed the an­nounce­ment, even though the bank­ing group’s share price traded lower yes­ter­day.

“FirstRand’s share price might be un­der pres­sure over the short term due to the un­bundling process,” says Sophié-Marié van Garderen, port­fo­lio man­ager at Truf­fle As­set Man­age­ment.

“[How­ever], over the longer term we see this as a pos­i­tive as the com­bined dis­tri­bu­tions from RMBH and Rem­gro would sig­nif­i­cantly in­crease the free float in some of the key in­dexes.”

This will make FirstRand both more liq­uid, and more at­trac­tive to for­eign share­hold­ers.


Rem­gro also in­di­cated it would be dis­tribut­ing its stakes in RMH and FirstRand “in full or in part”. Rem­gro holds an ef­fec­tive in­ter­est of 28.2% in RMH, and 4% of FirstRand.

There is po­ten­tially more of a short-term op­por­tu­nity here to re­alise value than in RMH, since Rem­gro was trad­ing at a 32% dis­count to its NAV at the time the an­nounce­ment was made.

“Over time, Rem­gro has been trad­ing at an av­er­age dis­count of 17% to its sum-of-the-parts value, so there is a lot of value to be un­locked,” says Schalk Louw, port­fo­lio man­ager and strate­gist at PSG Wealth.


Once RMH has dis­trib­uted its FirstRand stake, the com­pany also in­tends to sell its prop­erty port­fo­lio and ul­ti­mately delist from the JSE. This is also some­what of a recog­ni­tion that its in­ten­tion to di­ver­sify its as­sets hasn’t been suc­cess­ful.

For Mupunga, this is largely due to the size and suc­cess of its ex­po­sure to FirstRand.

“We have seen this with a few hold­ing com­pa­nies – it is dif­fi­cult to di­ver­sify your port­fo­lio when your largest ex­po­sure com­pany per­forms well,” says Mupunga.

Pic­ture: Money­web

WHO’S NEXT? Will more com­pa­nies be look­ing at cre­ative ways to re­alise value for share­hold­ers?

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