Standard Bank puts 33% premium on Liberty buyout

South Africa’s second largest lender has made a buyout offer to purchase the remaining 46% stake in local insurer Liberty that it doesn’t already own. The purchase will be a part cash, part share deal where the rationale is to create investment scale and synergies between the two businesses. Standard Bank and Liberty have shared a relationship for decades and Standard Bank Group CEO Sim Tshabalala said that this is next chapter for the relationship, as the bank expands and attempts to dominate the African continent. In a media press conference held earlier this afternoon, Tshabalala and David Munro, chief executive of Liberty and ex-Standard Bank employee, were visibly excited at the opportunities and scale the transaction will create. The buyout offer of approximately R90 per share represents a 33% premium to Liberty’s share price at the close of trade yesterday. If the transaction receives the requisite shareholder approval, Liberty will be delisted from the JSE and consolidated into the Standard Bank Group. – Justin Rowe-Roberts

Standard Bank and Liberty’s SENS announcement: 

Joint announcement of SBG’s firm intention to make an (i) an offer to acquire all of Liberty’s issued ordinary shares not owned by SBG or a treasury share holding subsidiary of Liberty and (ii) an offer to acquire all of Liberty’s issued preference shares, which will results in the delisting of all Liberty ordinary shares and Liberty preference shares

1. Introduction

Holders of Liberty ordinary shares (“Ordinary Shareholders”), holders of Liberty preference shares (“Preference Shareholders”) and shareholders of SBG are advised that on 14 July 2021(“Signature Date”) Liberty and SBG concluded an implementation agreement (“Implementation Agreement”) pursuant to which SBG intends to make an offer:

1.1  to acquire all of the issued ordinary shares of with a par value of 8.33 recurring cents each in Liberty (“Ordinary Shares”) other than those Ordinary Shares held by SBG and Lexshell 615 Investments Proprietary Limited (“Excluded Shareholders”) in terms of a scheme of arrangement (“Ordinary Scheme”) which is described in paragraph 4 below. If the Ordinary Scheme becomes operative, participants therein will receive 0.5 SBG ordinary shares (“SBG Consideration Shares”) plus an aggregate amount of R25.50 in cash per Ordinary Share, comprising (i) Ordinary Scheme Cash Consideration of R14.40 per Ordinary Scheme Share; and (ii) a Special Distribution of R11.10 per Ordinary Share, being an implied Aggregate Transaction Consideration of R89.46 per Ordinary Share as refererred to in paragraph 4.2.2 below; and

1.2  to acquire all of the issued preference shares with a par value of 10 cents each in Liberty (“Preference Shares”) for a price of R1.50 per Preference Share in terms of the Preference Share Offer which is described in paragraph 5 below, (collectively, the “Proposed Transaction”).

2. Rationale for the proposed transaction

SBG and Liberty have enjoyed a “special relationship” since 1974, as Liberty founder Sir Donald Gordon said in 1999. Over many years, the two groups of companies have cooperated at arm’s length through a highly successful and valuable bancassurance arrangement. The Proposed Transaction represents a natural progression in this special relationship, increasing the integration and ability to collaborate to provide the best financial service offerings to clients through the most efficient means.

SBG’s strategy is to be an Africa-focused, client centred and digitally enabled integrated financial services group. This strategy is underpinned by SBG’s purpose: Africa is our home, we drive her growth. SBG’s strategy and vision commits SBG to delivering simple, relevant and complete solutions to its clients through their preferred channel, whether online or in person. SBG has now begun the process of extending its range of services to become a trusted and preferred provider of an increasingly wide range of financial and associated services.

Liberty’s strategy is to become a human-augmented platform business whose purpose is to make its clients’ financial freedom possible. This naturally complements and reinforces SBG’s purpose and strategy.

The Boards of both SBG and Liberty believe that SBG’s acquisition of 100% of Liberty and integrating Liberty fully into the greater group will facilitate the creation of a united and formidable competitor in financial services in Africa with compelling scale.

The strategic benefits of the Proposed Transaction are numerous and compelling. A complete integration will enhance both entities’ ability to meet clients’ financial needs, making possible holistic advice and competitive solutions for clients, especially during major transition points in their lives. SBG’s banking, private client asset management and short-term insurance capabilitieswill complement Liberty’s strength in long term insurance and asset management, and this will enhance the competitive position of Liberty’s adviser force in the market. Liberty will be part of a larger and stronger entity and SBG will benefit from capital efficiencies following the Proposed Transaction. There is significant opportunity for rapid and efficient growth of fully integrated client offerings throughout SBG’s existing operations, as well as joint penetration of new market opportunities across Africa.

The Proposed Transaction is a strong vote of confidence by SBG in the strength of Liberty’s business, its client franchise, and very importantly its adviser networks and teams of people.

As is more fully set out in paragraph 9 below, the Independent Board of Liberty intends to recommend that the Ordinary Shareholders and Preference Shareholders vote in favour of the Ordinary Scheme and the Preference Scheme referred to in paragraph below.

3. Information about SBG

SBG has controlled Liberty since 1999, when it acquired control from the late Sir Donald Gordon. SBG is Africa’s largest financial services group by assets, with total assets of R2.5 trillion and a market capitalisation of R208 billion at 31 December 2020. SBG is listed on the JSE and A2X with share code SBK, and the Namibian Stock Exchange, share code SNB. The SBG group, including Liberty, employed just over 50,000 people across all of the 20 geographies in which it has operations at 31 December 2020, and had 1,124 branches and 6,774 automatic teller machines to service clients’ needs. SBG had headline earnings of R15.9 billion for the year ended 31 December 2020.

SBG is an African-focused, client-centric, digitally enabled integrated financial services organisation. SBG’s strategy is designed to realise the opportunities presented by Africa’s longer- term structural trends. The SBG group places its clients at the heart of everything it does, ensuring that its businesses are always on, always there to deliver to clients’ needs in a secure, personalised and relevant way.

SBG has a 158-year history in South Africa and started building a franchise in sub-Saharan Africa almost 30 years ago. SBG has an on-the-ground presence in 20 countries on the African continent, and solid local knowledge required to operate a successful business in Africa. Its fit- for-purpose representation in, and connection with, global financial centres enables it to facilitate investment and development flows in Africa, and to access international capital to facilitate growth, diversification and development in Africa. SBG also has a strategic partnership with the largest bank in the world, the Industrial and Commercial Bank of China Limited (ICBC), which is a 20% shareholder in SBG.

The long-term foreign currency ratings for The Standard Bank of South Africa Limited (“SBSA”), the single largest operating entity within the SBG group, are: Fitch Ratings BB- (negative) and Moody’s Ba2 (negative).

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