Imara Holdings Limited, the pan African investment banking house is finalising the disposal of its South Africa’s based stockbroking unit.
The Imara S.P. Reid (ISPR) will be sold to MMI Strategic Investments Proprietary Limited for a consideration of P100 million. The sale of the unit is blamed on the increase in online share trading, escalating regulatory and compliance costs, together with generally changing market dynamics that has led to growing pressure and competition for independent stockbroking companies in South Africa.
“In response, the Board took the decision to review various options relating to the Company and its future earnings contribution to the Group. These included the investment of further working capital required by the Company for additional carry facilities and the forthcoming shorter settlement period being introduced by the JSE Limited, and as an alternative the disposal of the Company,” said Imara in a market update.
“The Board’s view was that the Company, which remains an attractive investment within the stockbroking industry in South Africa, needs a parent willing and able to fund its growth needs.”
The purchaser, MMI Strategic Investments core business currently comprises of asset management, savings, investment, healthcare administration, health risk management, employee benefits, and rewards programmes.
According to the company, which is at a premium in excess of 40% to the current Net Asset Value of the Company, disposal is attractive to IHL. As a result, the Board believes it is in the best interests of both IHL and ISPR to pursue the disposal.
The figure, however, is subject to a Purchase Price Adjustment depending on a variance to the NAV of ISPR at the Effective Date under the Sales and Purchase Agreement between the two.
The agreement is that if the NAV at the Effective Date is within 5% of the NAV as at September 2014 (ZAR82.8m), there will be no Purchase Price Adjustment. In the event that ISPR’s NAV has decreased by 5% or more from the figure presented at September 2014 (ZAR82.8m), a downward adjustment will be made to the Consideration (ZAR120 million) on a rand-for-rand basis and as at 31 October 2014, ISPR had an NAV of ZAR82.7 million.
“The Board does not expect there to be any material adverse change to this NAV figure as at the anticipated Effective Date since ISPR trading continues to be in-line with expectations,” Imara said.
Imara recently released results for six months ended 31 October, 2014, which showed stockbroking businesses improved performance in South Africa and Zambia. Imara has its presence in Angola, Botswana, Kenya, Malawi, Mauritius, Namibia, Nigeria, South Africa, United Kingdom, Zambia and Zimbabwe.
