Alexander Forbes to list in July
Alexander Forbes will list on the Johannesburg Securities Exchange (JSE) in the latter half of July, subject to requisite approvals by the JSE, it announced on Monday.
On listing, Alexander Forbes Equity Holdings Proprietary Limited (AFEH) will change its name to Alexander Forbes Group Holdings Limited.
This is not a public offering but an offering to institutional investors. Mercer Africa Limited, a wholly owned subsidiary of Marsh & McLennan Companies Inc., will become a 34% shareholder in the group. Mercer is a global consultant in talent, health, retirement and investments.
“This is a great opportunity for Mercer, because it gives them access into the South African and African story,” Alexander Forbes Group CEO Edward Kieswetter told journalists on Monday morning.
He said this was a great vote of confidence in Alexander Forbes as an organisation, since Mercer’s offer for a 34% stake was irrevocable and not dependent on the offer price.
Mercer would also be able to assist Alexander Forbes clients with expansion plans outside of Africa, the company said. “At the same time, this partnership will provide opportunities for our employees to advance their own talent and potential,” Kieswetter said.
“This was a transparent process. A number of parties, locally and internationally, put out a bid. We considered the [Mercer offer] to be in the best interest of all parties,” he noted.
Having listed in 1996, Alexander Forbes was delisted in 2007 as part of a leveraged buyout by a consortium of private equity investors, black economic empowerment investors and management.
Kieswetter said that the primary purpose of the listing was an “orderly and structured exit of current investors and an opportunity for new investors to come on board”.
“We are not intending to raise capital for the group, which is highly cash generative and profitable,” commented CFO, Deon Viljoen, who said the listing was largely a shareholder transaction and would see a small component of equity raised.
“After the initial offering it [will] become a fully tradable share by all investors,” Kieswetter confirmed.
Viljoen said that preference shares remained in place for the time being, but would be unbundled to preference shareholders. “All shareholders must exit, those that want to reinvest can do so,” Kieswetter said.
The intended date for listing is July 24.
Mercer’s stake, dividend policy
Kieswetter said the announcement brought to a close a two-year process, when management first acquired a mandate to plan the exit of the current private equity shareholders. Consideration of final offers and outcomes was an “intense process” conducted over the last six months, with final decisions made in the last week.
Mercer will acquire 14.9% at the time of the listing and an additional 19.1% thereafter. The offer price will be disclosed in the pre-listing statement. “There is a healthy price tension between the buyers and sellers, which will derive the best outcome,” Kieswetter said.
Mercer will be represented on the Alexander Forbes board of directors, contributing expertise in the areas of health, retirement and investments. “The board will be reconstituted, but there will be continuity through myself and the chairman [Sello Moloko], among others,” Kieswetter said.
The agreement with Marsh (via the Mercer stake), Kieswetter said, would result in “combined growth, where the whole is greater than the sum of its parts. The spirit of the agreement would be to work together to create greater value,” he commented.
In 2011, Marsh, the global corporate insurance broker, acquired the brokerage business of Alexander Forbes.
Alexander Forbes is considering setting a dividend policy in a range between 1.5x and 2.0x earnings cover (corresponding to 50% to 67% dividend payout ratio range), at the discretion of the board.
Kieswetter said that Alexander Forbes was actively engaging with institutional investors locally, as well as in London, New York and Boston. “The overall shareholding would need to include a level of empowerment,” he acknowledged in a response to a question on whether the group would secure Black Economic Empowerment (BEE) shareholders.
He said Alexander Forbes would consolidate its current position before looking for new opportunities in the rest of Africa.
Kieswetter underlined that the change of ownership would not change Alexander Forbes’s commitment to steward the business and the money invested in it by South Africans.