South Africa: Motsepe's ARC to Become Alexander Forbes' Biggest Shareholder

Patrice Motsepe's African Rainbow Capital is set to become the new majority shareholder at Alexander Forbes, after announcing plans to buy over R1bn of the pension fund administrator's shares.

The investment holding company, which owns TymeBank and has stakes in telecoms operator Rain and Afrocentric, is already the second-biggest investor in the Alexander Forbes Group after Mercer Africa, owning a 13.7% stake. But it also holds a stake in the unlisted subsidiary, Alexander Forbes Limited.

Mercer Africa, on the other hand, currently holds 34.4% of Alexander Forbes' ordinary shares, but according to the statement issued by Alexander Forbes - also on Wednesday evening - Mercer has decided to exit its investment in Alexander Forbes Group Holdings. Once the sale of Mercer's shares is completed and all the proposed deals are sealed, ARC will become the biggest shareholder.

In a statement posted just before Alexander Forbes' late on Wednesday, ARC said it was going to buy 193 million shares from Mercer Africa for R1.013bn. This will take ARC's stake in the pension fund administrator to 28.6%. But ARC will also be exercising another option that it negotiated back in 2016, when it first became Alexander Forbes' empowerment partner.

According to that deal, Patrice Motsepe's investment arm has the right to exchange its shareholding in the unlisted subsidiary (Alexander Forbes Limited) for shares in the listed Alexander Forbes Group Holdings shares, subject to certain conditions. ARC has decided that it will go ahead and "flip-up" its stake in the unlisted entity.

Alexander Forbes said it will also buy back R1.03bn worth of shares from Mercer which represent 15.6% of the company's issued stock at a discount. After this repurchase, ARC's stake in Alexander Forbes will increase to 33.9%. Once the impact of the so-called flip-up is accounted for, ARC will own 41.3% in Alexander Forbes Group Holdings, while Mercer's stake will decrease to 4.5%, making ARC the new majority shareholder in the company.

Alexander Forbes said Mercer's decision to offload the majority of its stake was part of "routine" evaluation of the multinational's investment portfolio. "Alexander Forbes and Mercer have shared several strategic business initiatives over the past five years... The company and Mercer will continue to work together, jointly innovating and delivering world class solutions to clients across Africa, including through Arrive - the joint Pan-African benefits solution," read Alexander Forbes' statement.

Fin24

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