Patrice Motsepe’s African Rainbow Capital (ARC) is set to increase its stake in Alexforbes, South Africa’s largest employee benefits firm, to nearly 80%.
The move comes a decade after it first invested in the group and forced a strategic rethink.
ARC, which delisted from the JSE last year, is an investment holding company controlled by Motsepe.
On Friday one of its key investors in Alexforbes, Prudential, said it had decided to sell its stake in the company, with ARC pouncing on the move by the US-based firm.
Under two separate transactions, worth $185m, Alexforbes will repurchase about 372.8-million shares held by New Veld (Prudential’s entity), and ARC will acquire New Veld’s about 74.1-million shares.
This will see ARC’s stake in Alexforbes rise to 78%, from just less than 50%, and open the door for a possible delisting from the JSE by Alexforbes.
“Prudential Financial recently completed a strategic review of its global operations, which resulted in a decision to simplify its international footprint through the disposal of its emerging markets businesses. Shares in Alexforbes form part of Prudential Financial’s emerging markets portfolio,” Alexforbes said in a statement.
“If both the specific repurchase and the ARC AF Holdings transaction proceed, New Veld will no longer hold any Alexforbes shares, and ARC AF Holdings will hold 77.94% of Alexforbes shares.
“If the specific repurchase is implemented but the ARC AF Holdings transaction is not implemented, ARC AF Holdings will hold 69.95% of all Alexforbes shares in issue, and New Veld will hold 7.99% of Alexforbes shares. If the ARC AF Holdings transaction is implemented but the specific repurchase is not implemented, ARC AF Holdings will hold 55.59% of all Alexforbes shares in issue.”
David Legher, head of emerging markets at Prudential, said Alexforbes has been an important and successful investment for the group.
“These transactions mark further execution on our strategy, allowing us to narrow our focus on the businesses and markets where we see the strongest opportunities for long-term growth,” Legher said.
“It also positions Alexforbes for continued success under a more concentrated ownership structure. We are grateful for the strong partnership we have built and remain committed to supporting a smooth transition.”
Alexforbes is a key cog in ARC’s portfolio, which includes stakes in GoTyme and Rain. The investment holding group first invested in Alexforbes in 2016, taking up a 10% stake which it built up over the years.
The investment group led the push to pivot Alexforbes’s strategy, leading to the ouster of former CEO Andrew Darfoor in 2018 after clashes on strategy.
ARC Investments’ (ARCI’s) Johan van Zyl led the charge and tore into Darfoor’s “Ambition 2022″ strategy, which focused on driving growth through expanding its retail business segment alongside expansion in Sub-Saharan Africa through selective bolt-on acquisitions.
Van Zyl, credited with turning around Sanlam’s fortunes during his CEO tenure, was clear to Darfoor: get out of capital-intensive areas such as insurance (both life and general), where the group did not have scale, and focus on advice and distribution as its core revenue streams.
ARCI’s misgivings about the strategy pursued by Darfoor were that it had suffocated the share price, with returns to shareholders not forthcoming. And as in many cases where the CEO does not see eye to eye with a top shareholder, it was the former who had to jump or be pushed.
In stepped Dawie de Villiers as CEO, who wasted little time in taking to market a refreshed strategy anchored on moving the business away from capital-intensive ventures and divesting from some businesses that were no longer aligned with the revised strategy.
The strategy, launched in March 2019, reaffirmed Alexforbes’ strength as a trusted adviser to its clients with a renewed focus on the core businesses of consulting, administration and investments.
De Villiers quickly disposed of the insurance business to Momentum for nearly R2bn. The group also transitioned the Alexforbes-sponsored umbrella fund to private administration.
A leaner, more focused and efficient business led to substantially reduced capital requirements. So much so that Alexforbes could return capital to its shareholders, with dividends and special dividends a regular occurrence.
The corporate actions of the past six years increased the group’s surplus capital, allowing it to reallocate resources to strategically aligned areas, pursuing organic and acquisitive growth.
To this end, the group has acquired six businesses over the past three years, including TSA Administration in a deal that strengthened group risk insurance services, and OUTvest to enhance digital wealth management.
Alexforbes in 2024 made a foray in the R500bn discretionary fund management market, contributing to growth in retail new business asset inflows.
The company’s share has reacted in kind, up more than 100% in the past five years, with the group valued at R10bn on the JSE.
Business Day
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