Shares of Alexander Forbes surged almost a quarter on Friday, their best day on record. That was after it announced that New York-listed investment manager Prudential Financial had reached a deal to pick up about a R1.05bn, or 15% stake, and was looking to more than double it.
Prudential Financial is seeking access to Africa’s fast-growing market for financial services, and has agreed to buy 200.8-million shares, or 14.8% of the group’s issued share capital, at R5.25 apiece, through subsidiary New Veld. The offer represents an almost 40% premium to the R3.76 the group’s shares fetched at Thursday’s close.
In afternoon trade on Friday, shares of Alexander Forbes surged 22.23% to R4.60, putting them on track for their best day since they listed in 2014, and adding about R1.1bn in market value.
Prudential is a 145-year-old global financial services group and active global investment manager with more than $1.5-trillion (R22.44-trillion) in assets, with its Alexander Forbes stake following investments into Ghana and Kenya.
New Veld’s investment manager is LeapFrog Investments, and the agreement has been reached with Mercer Africa, a subsidiary of the US-listed Marsh & McLennan Companies, the group’s second-largest shareholder.
“This transaction underscores Prudential’s continued focus on Africa as a strategically important growth market and our vision to be a global leader in expanding access to investing, insurance and retirement security,” said Pavan Dhamija, Prudential Financial’s regional president for Africa, India, Indonesia, and Business Development.
“We identified Alexander Forbes as the market leader in SA best capable of advancing our vision and strategy,” he said.
Prudential has also indicated that it may make a partial offer to Alexander Forbes shareholders, or a specified percentage held by each eligible shareholder, as it looks to bulk up its stake to as much as 33%, also intending to pay R5.25 per share.
ARC Financial Services Investments, the group’s largest shareholder with 39.9% of its issued share capital, has however indicated it will not accept this offer, Alexander Forbes said on Friday. ARC declined to comment.
Alexander Forbes said the investment was an expression of confidence, with CEO Dawie de Villiers saying in a statement the conviction of long-term shareholders, including ARC, was an indication of the group's investment case.
“It is an exciting development, and we look forward to leveraging the global insights available through Prudential Financial to enhance our value proposition,” he said.
Casparus Treurnicht, a portfolio manager at Gryphon Asset Managers, said it was worth noting many SA companies had struggled in their push into Africa, while the big question was whether a complete buyout was being contemplated.
As a foreign company, this could face pushback from Competition Authorities, said Treurnicht, which has entered the realm of making decisions that go beyond ensuring competition and preventing market dominance.
“We’ve seen plenty of foreigners coming into the local market over the past few years only to realise that things work a bit different here,” he said.
Update: March 18 2022
This article has been updated with additional information throughout.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.