Imara Holdings Limited, the pan African investment banking house, has been given the go ahead to dispose its South Africa’s stockbroking unit following sanctioning of the deal by shareholders.
The company held its Extraordinary General Meeting (EGM) recently and agreed to sell Imara S.P. Reid Proprietary Limited to MMI Strategic Investments Proprietary Limited for a consideration of P100 million, according to the Botswana Stock Exchange (BSE) quoted group.
“Following the circular to shareholders dated 24 February 2015, Imara Holdings Limited is pleased to announce that at its Extraordinary General Meeting held on Tuesday 24th March, shareholders representing 79.56 percent of the eligible vote approved the resolution for the disposal of Imara S.P. Reid Proprietary Limited by IHL,” the Africa focused group stated.
Imara needed shareholder approval, but now awaits other approvals for the deal to be concluded.
“The completion of the disposal of Imara S.P. Reid Proprietary Limited remains subject to the conditions precedent as set out in the Shareholders Circular. Shareholders will be advised when these are fulfilled and the disposal completes,” Imara added.
Imara said in the past it decided to dispose its South African stock broking unit on the back of an increase in online share trading, escalating regulatory and compliance costs, together with generally changing market dynamics that have 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 to 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 long and short-term insurance, asset management, savings, investment, healthcare administration, health risk management, employee benefits, and rewards programmes.
According to Imara, several proposals during the disposal process and the board believes the consideration being received, which is at a premium in excess of 40 percent to the current Net Asset Value of the Company, makes the disposal 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.