Alexander Forbes Confirms its Intention to Float on the JSE Main Board
Listing marks next evolution of Alexander Forbes in its quest to grow its business
- Alexander Forbes has attracted a strong institutional investor of strategic importance
- Investment by Mercer a vote of confidence in Alexander Forbes’ leadership and in South Africa as an investment destination
- Mercer to participate in the Africa growth story through a world class Alexander Forbes brand.
Alexander Forbes Equity Holdings Proprietary Limited, which is to become a public company and change its name to Alexander Forbes Group Holdings Limited ("the Group" or "Alexander Forbes") has today confirmed its intention to list on the securities exchange operated by the JSE Limited ("JSE"), subject to requisite approvals by the JSE. This follows the cautionary announcements of 17 April 2014 and 5 June 2014 in terms of which the Group indicated that it was exploring various strategic options.
Edward Kieswetter, Group Chief Executive of Alexander Forbes said:
"We are proud to announce that, following the evaluation of various strategic options for the Group, we are progressing with a listing, which will enhance our profile, provide a realisation event for our existing shareholders and grant us access to the capital markets as well as help us attract and retain key staff. Mercer’s strategic investment in the Group is a resounding vote of confidence in our country, our region and our world class company. Mercer will provide additional benefits for our clients in Africa, while our employees will have access to the latest global skills and trends to help them serve our clients better throughout the world. At the same time, this partnership will provide opportunities for our employees to advance their own talent and potential."
Alexander Forbes: a world-class company providing impactful service
Alexander Forbes is a specialised financial services group headquartered in South Africa focusing on securing the financial well-being of its clients through institutional employee benefits solutions and individual financial solutions, in particular for employees of the Group’s institutional clients.
The principal services provided by the Group include retirement funds and investment consulting, actuarial and administration services, employee risk benefits and healthcare consulting, personal lines as well as business insurance and multi-manager investment solutions.
Through its ”˜Higher Purpose’ orientation which focuses on providing impactful service that touches people’s lives, Alexander Forbes maintains market-leading positions in the employee benefits, consulting and investment solutions sectors in South Africa and certain other sub-Saharan countries. The Group has gained traction by advancing growth opportunities in the retail and public sector market segments. It also has a well-established footprint favourably positioned to capture the sub-Saharan African growth opportunity.
The Group was founded over 75 years ago and was listed on the JSE in 1996. In 2007, the Group was delisted as part of a leveraged buyout by a consortium of private equity investors, Black Economic Empowerment investors and management ("the Existing Shareholders").
Since 2007, Alexander Forbes has substantially delivered on its strategic intent by refocusing the Group through a number of divestments and non-core asset disposals.
On 31 March 2014 the Group completed a capital reorganisation and restructure, which has resulted in a simplified and more flexible financial position. As a result, the Group believes it is now well-positioned to further strengthen its core businesses and related market positions and to drive its growth strategies with clear focus.
The offer and listing
The listing will provide a structured and orderly opportunity for the Existing Shareholders to dispose of a portion of their investment in the Group. It will also enhance the public profile and general awareness of the Group and enable Alexander Forbes to access capital markets, if required. Moreover, it allows the Group to further pursue its strategic growth path as commenced in 2010.
The offer will comprise an issue of new shares by Alexander Forbes and a sale of existing shares by certain of the Existing Shareholders (the "Offer"). A pre-listing statement including full details of the Offer will be made available in due course. The Offer will not be open to the public.
Deutsche Securities (SA) Proprietary Limited ("Deutsche Securities") and Rand Merchant Bank, a division of FirstRand Bank Limited ("RMB") have been appointed to act as joint transaction sponsors in relation to the listing. Deutsche Bank AG, London Branch ("Deutsche Bank"), Morgan Stanley & Co. International plc ("Morgan Stanley") and RMB have been appointed to act as joint global coordinators and joint bookrunners in relation to the Offer.
The Mercer strategic investment: access to African opportunities
Conditional upon the listing proceeding and subject to obtaining the requisite regulatory approvals, Mercer Africa Limited, a wholly-owned subsidiary of Marsh & McLennan Companies, Inc. ("Mercer") will become a key strategic shareholder in the Group. Mercer has reached agreement with the Selling Shareholders to acquire 34% of the shares in the Group (structured as 14.9% at the time of the listing and, subject to the receipt of requisite regulatory approvals, an additional 19.1% thereafter) at a price linked to the Offer price, as will be disclosed in the pre-listing statement.
Alexander Forbes believes that the two organisations share a strong fit in terms of culture and values and expects that the Mercer investment will provide significant benefits for both organisations. Mercer will have representation on Alexander Forbes’ board of directors, contributing its strategic expertise and global perspective in the areas of health, retirement and investments. Further, Mercer will be able to support Alexander Forbes’ clients currently operating outside of Africa or those which have expansion aspirations beyond Africa.
Mercer is making this investment to gain exposure to growth prospects in South Africa and the broader sub-Saharan Africa markets through the strength and leadership of Alexander Forbes and its well-respected brand. Mercer also expects that this investment will support its own global clients to expand and succeed in Africa, which it views as particularly relevant given the increasing level of global companies developing, investing and expanding into Africa.
The Group’s dividend policy and ability to pay dividends is dependent on compliance with the minimum capital requirements of the Group's businesses and any decision to retain cash to support the Group's growth initiatives.
Alexander Forbes is considering setting a dividend policy in a range between 1.5x and 2.0x earnings cover (corresponding to 50-67% dividend payout ratio range), with absolute discretion by the Board to determine actual dividend declarations.
In addition, it is the Group’s intention to return any excess capital above its capital targets to shareholders in the form of share repurchases and special dividends.
The Group believes it has attractive long-term prospects, underpinned by an enabling macro-economic environment that is expected to support growth opportunities across the Group’s businesses. The Group believes it is well-positioned to consolidate its strong market position in its core businesses and to drive its growth strategies with clear focus.
In the medium term, implementation of the Group’s strategy is expected to result in revenue growth broadly in line with the growth in assets under administration and management in the low double-digits and growth in operating expenses in the high single-digits. Revenue growth is expected to be enhanced through the implementation of the Group’s growth strategies which are focused on the retail and public sector segments and expanding in sub-Saharan Africa.
The Group’s trading margin is expected to improve as the existing platform becomes more efficient and scalable, together with a continued disciplined focus on managing the expenses of the Group.