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Limited
Standard Bank Investment Corporation Limited
(Incorporated in the Republic of South Africa)
(Registration number 1969/017128/06)
Share code: SBC ISIN Code: ZAE000014858
("Stanbic")
Liberty Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1968/002095/06)
Share Code: LBH ISIN Code: ZAE000004040
("Libhold")
Liberty Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1957/002788/06)
Share Code: LGL ISIN Code: ZAE000024543
("Liberty")
STANBIC AND LIBERTY TO
- Form new jointly held wealth management group STANLIB Limited:
- by merging their respective asset management, unit trust, linked
products and investment marketing businesses;
- Liberty to receive R134 million in cash from Stanbic to achieve 50/50
holding; and
- Liberty to retain R323 million of Libam assets.
- Extend period of bancassurance contract
- Enter into an agreement for Liberty to manage Stanfin
- Retain existing equity ownership structure
Standard Corporate and Merchant Bank ("SCMB") and Deutsche Securities (SA)
(Pty) Limited ("Deutsche") are authorised to announce that Stanbic and
Liberty, pursuant to their stated objective of extracting maximum value from
their relationship, have agreed to implement two strategic initiatives in
the areas of wealth management and bancassurance which will enhance the
relationship between the two organisations and create significant additional
value in the future.
1. Background
As indicated in 2001, Stanbic and Liberty (together, "the parties")
undertook extensive research and evaluation of a range of options in respect
of the nature and structure of their future relationship. As a result, the
parties have concluded that most of the benefits of the relationship can be
achieved within the existing equity ownership structure and that there is at
present no compelling evidence to indicate that cost or revenue synergies
could be extracted which would be sufficient to warrant a full merger. The
parties have, therefore, agreed to pursue those steps which will extract the
value of their existing successful working relationship most effectively.
2. Formation of wealth management group
Global and domestic trends in the financial services industry increasingly
emphasise the importance of wealth management as a growing requirement of
clients. The parties have concluded that it is strategically important to
expand their presence in the area of wealth management, in particular in the
design and sale of financial products and services which will complement the
current insurance and investment product offering by Liberty and the banking
product offering by Stanbic. The parties have, therefore, agreed to create a
new jointly controlled wealth management group, the holding company of which
will be STANLIB Limited ("STANLIB"), by merging their respective asset
management, unit trust, linked products and investment marketing businesses
("the transaction"). STANLIB will capture the combined strengths of Stanbic
and Liberty to create a new centre of excellence and a world-class wealth
management platform.
The advantages of creating STANLIB include:
- powerful and far-reaching distribution which creates client convenience;
- leveraging the power of two blue chip brands;
- combining asset management, banking and actuarial skills for product
development;
- pooling and leveraging of intellectual capital; and
- achieving economies of scale.
2.1 The Stanbic and Liberty businesses
SCMB Asset Management ("SCMBAM"), Standard Bank Unit Trusts Limited
("SBUT"), Standard Bank Linked Investment Services ("SBLIS") and Stanbic's
50% interest in Lodestone Holdings (Proprietary) Limited ("Lodestone") (the
"Stanbic businesses") comprise the domestic and African asset management,
unit trust and linked product businesses of Stanbic. SCMBAM and SBLIS
operate as divisions of The Standard Bank of South Africa Limited ("Standard
Bank") and SBUT is a subsidiary.
Liberty Asset Management Limited ("Libam"), Liberty Collective Investments
Limited ("LCI"), Liberty Specialised Investments (Proprietary) Limited
("LSI"), Liberty's 52% interest in Silgen Financial Services (Proprietary)
Limited ("Simeka") and its 50% interest in Lodestone (the "Liberty
businesses") comprise the domestic asset management, unit trust and linked
product businesses of Liberty.
Prior to implementation of the transaction, Liberty will receive a
distribution from Libam to the value of R323 million which represents the
net assets of Libam which do not form part of the transaction.
The Stanbic businesses and the Liberty businesses have to date pursued
strategies which have developed different strengths within the same business
segments.
The attainment of superior investment returns is a fundamental driver of
value for both the policyholders and shareholders of Liberty. It has,
therefore, been the major focus of Libam to achieve such superior investment
performance, which has also served to provide the platform for Liberty and
LCI to sell both insurance and financial investment products primarily in
the affluent/high net worth and larger corporate sectors of the market.
The Stanbic businesses have been highly successful in developing retail unit
trust sales, particularly money market products, through the Standard Bank
network and customer base.
The distribution power of the Stanbic businesses and the marketing skills of
their staff are considerable strengths which will be contributed to STANLIB
and superior investment performance is considered the key contribution the
Liberty businesses will make to STANLIB.
The profile of the combined businesses is set out below:
Funds under CAGR of funds Funds under
management(1) under management(2) administration(1)
Rbn % Rbn
STANLIB 135 15 13
Notes:
(1) At 31 December 2001.
(2) Compound annual growth rate 1999 - 2001.
2.2 STANLIB
2.2.1 On creation STANLIB will be a major force in financial services in the
following key areas:
Distribution
The ability to leverage a powerful distribution network, comprising:
- 620 consultants and intermediaries of Standard Bank Financial Consultancy
("Stanfin"), the financial products sales force of Standard Bank;
- 380 Standard Bank branches;
- 800 Independent Financial Advisors ("IFAs");
- 950 Liberty agents;
- 900 Liberty franchise agents; and
- 4 500 brokers who support Liberty.
Size
R135 billion of funds under management and R13 billion of funds under
administration generates economies of scale. The unit trust business will be
the largest in South Africa in terms of gross sales. In addition, client
overlap in the wholesale portfolios is very limited.
Investment track record
The achievement of the Raging Bull Plexus award for the best asset
management company over the past three years by Libam, which will be renamed
STANLIB Asset Management, provides a powerful platform for the marketing of
STANLIB's investment management performance.
Product range
STANLIB will be able to offer to its clients and those of Standard Bank and
Liberty an extensive range of products carrying the Standard Bank or Liberty
brand names, hedge and international funds and a wide variety of third party
domestic and offshore products.
Funds under management profile
Domestic fixed income 13%
International 17%
Domestic money market 17%
Domestic equities 53%
People
STANLIB will have considerable and proven skills in asset management and
marketing and will be well positioned to attract the best people.
2.2.2 Strategically the creation of STANLIB positions:
- The greater Stanbic Group including Liberty across all segments of the
market, addressing the convergence of insurance and banking products;
- Stanbic and Liberty to compete effectively together in the market for
high net worth wealth management and growth in high margin investment
products; and
- Stanbic and Liberty to respond to the requirement of clients for wide-
ranging and convenient channels of distribution.
The market positioning of STANLIB will permit it to develop an identity of
its own and to take advantage of a rapidly growing market.
2.2.3 The medium and longer-term financial benefits of the transaction are
expected to be significant as the strategic advantages it creates are
exploited. Once-off merger and taxation costs are envisaged to have a small
negative impact in 2002, thereafter STANLIB is expected to enjoy enhanced
revenues and profitability.
2.3 Structure of the transaction
On implementation of the transaction, STANLIB will become the holding
company of the Stanbic and Liberty businesses. On a comparative basis the
valuation of the transaction is R1 773 million. This requires Stanbic to pay
a cash consideration of R134 million to Liberty in order to establish the
required 50:50 ownership. The effective date of the transaction is 1 January
2002 and the cash consideration will attract interest from that date.
The transaction will result in the following structure:
Stanbic Liberty
50% 50%
STANLIB
100% 100%
STANLIB Asset Management STANLIB Wealth Management
(incorporating Libam and (incorporating LCI, LSI, SBLIS,
SCMBAM) SBUT, Lodestone and Simeka)
2.4 Management of STANLIB
2.4.1 Board of directors of STANLIB
The Board of directors of STANLIB will comprise nominees from Stanbic and
Liberty and certain external non-executive directors. Liberty will have the
right to nominate the Chairman of the Board, subject to the concurrence of
Stanbic. Roy Andersen will be appointed as first executive chairman of
STANLIB and will also continue in his role as CEO of Liberty.
2.4.2 STANLIB Asset Management
Liberty will have the right to nominate the CEO of STANLIB Asset Management,
subject to the concurrence of Stanbic. The parties have agreed that Alan
Miller, the current Managing Director of Libam, will become CEO of STANLIB
Asset Management.
2.4.3 STANLIB Wealth Management
The parties have agreed that the current CEO of SCMBAM, John Liackman, will
become CEO of STANLIB Wealth Management.
2.5 Financial effects of the transaction
2.5.1 Stanbic
The financial effect on the headline earnings per share and the net tangible
asset value per share of Stanbic will be immaterial.
2.5.2 Liberty
The financial effect on the headline earnings, embedded value and net
tangible asset value per share of Liberty will be immaterial. Including
intangibles, the net asset value per share will increase by 4,4% as a result
of the recognition of the fair value increase which results from the
transaction.
3. Bancassurance
Stanbic and Liberty have been developing the bancassurance business
relationship between them for more than 10 years and the current contract in
respect of the sharing of the financial benefits of the relationship has
been in existence for two years. The parties have decided that, in order to
affirm their commitment to its success, the contract will be extended to
2012.
In addition, it has been agreed that Liberty will enter into a management
contract with Standard Bank to manage the Stanfin sales force (together with
the extension of the bancassurance contract "the bancassurance initiative").
The parties expect that introducing the proven skills of Liberty in the
recruitment, training and management of a highly successful sales force will
increase the volume of sales by the Stanfin force from which Liberty and
Stanbic will benefit.
In terms of the contract, which will be for a period of 10 years, Liberty
will receive a management fee for managing Stanfin.
4. Fairness opinion
Although not required in terms of the Listings Requirements of the JSE
Securities Exchange South Africa, the Board of Directors of Liberty has
requested and has received a written opinion from Deutsche that, based on
the terms of the transaction and the bancassurance initiative as currently
represented to Deutsche by the parties and from a financial perspective, the
transaction and the bancassurance initiative considered together are fair
and reasonable to the shareholders of Liberty. Deutsche reserves the right
to reconsider its opinion should the terms of the transaction and the
bancassurance initiative as reflected in signed agreements between the
parties vary materially from those currently represented to Deutsche.
5. Conditions precedent
The transaction and the bancassurance initiative remain subject to the
following conditions precedent:
5.1 In respect of the transaction:
5.1.1 signature of final agreements between the parties; and
5.1.2 approval, to the extent necessary, in terms of the Competition Act and
all other applicable legislation.
5.2 In respect of the bancassurance initiative:
5.2.1 signature of final agreements.
Johannesburg
26 February 2002
Merchant bank and sponsor to Stanbic
SCMB
Standard Corporate and Merchant Bank
(A division of The Standard Bank of South Africa Limited)
(Registration number 1962/000738/06)
Legal adviser to Stanbic
Bowman Gilfillan Inc.
Registration number 1998/021409/21
Sponsor to Libhold
Merrill Lynch
Smith Borkum Hare
Merrill Lynch South Africa (Pty) Ltd
Registered sponsor and
Member of the JSE Securities Exchange South Africa
Registration number 1995/001805/07
Financial adviser to Liberty
Deutsche Securities
Member of the Deutsche Bank Group
Deutsche Securities (SA) (Proprietary) Limited
(Registration number 1995/011798/07)
Legal advisers to Liberty
Werksmans Incorporated
(Registration number 1990/007215/21)
Sponsor to Liberty
Merrill Lynch
Smith Borkum Hare
Merrill Lynch South Africa (Pty) Ltd
Registered sponsor and
Member of the JSE Securities Exchange South Africa
Registration number 1995/001805/07
Transaction sponsor to Liberty
Deutsche Securities
Member of the Deutsche Bank Group
Deutsche Securities (SA) (Proprietary) Limited
(Registration number 1995/011798/07)
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