RMH to unlock billions through FirstRand unbundling

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The investment holding company says shareholders will benefit by holding shares in the banking group directly.

RMB Holdings (RMH) is going ahead with the unbundling of its 34% stake in banking group FirstRand in a move it says will unlock about R5.41bn in value for shareholders. The transaction will end a 27-year association between the two companies, leaving RMH with a portfolio of property development assets in SA and Eastern Europe.

RMH listed on the JSE in 1992, giving investors a vehicle to co-invest with its founders. In 2011, its insurance interests were separately listed as RMI. It said it had helped FirstRand grow its market capitalisation from R35bn in 1998 to about R228bn and the decision to unbundle was partly due to the widening discount its shares traded at relative to their intrinsic value.

The RMH restructuring is being conducted concurrently with investment holding company Remgro, which will distribute its 28.2% interest in RMH to its own shareholders.

The FirstRand shares will be distributed to RMH shareholders on a pro-rata basis by way of a distribution in specie. It will result in shareholders holding a direct interest in FirstRand, rather than holding that interest through RMH. Had the unbundling occurred at last Thursday's closing prices for both companies on the JSE, it said it would have represented a value unlock of R3.83 per share

Following the unbundling, RMH will remain listed with RMH Property as its only asset. RMH Property has a portfolio of property development assets spread across South Africa and Europe, anchored in a partnership with property development company Atterbury Group.

The RMH Board has carefully considered the unprecedented market conditions resulting from the Covid-19 pandemic, as well as a weakening South Africa macro-economic environment," the company said. "The RMH Board believes that the terms and construct of the RMH Unbundling… are still in the best interests of Shareholders and other stakeholders."

Shareholders will be required to vote on the RMH unbundling at a general meeting on 1 June, with the unbundling scheduled for the end of June if investors give the go-ahead. It said an independent board had been established to consider the proposal, with Merrill Lynch appointed as an independent expert to provide a fair and reasonable opinion. The transaction also requires Reserve Bank approval.

Meanwhile, RMH said together with RMI it was forming a joint Covid-19 support fund which will be administered by AlphaCode, an incubation, acceleration and early-stage investment division of RMI. The fund will house personal and voluntary contributions from senior management and the boards of both companies, and includes funding from both RMH and RMI directly. It will be focused on early-stage financial services businesses and members, specifically those associated with AlphaCode and its various existing support and funding programmes.

RMH's shares closed 0.2% higher at R52.87 yesterday while FirstRand gained 1.5% to R41.23. The announcement was made after the close of trade.