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Firstrand Limited - Momentum submits offer for Sage

Release Date: 20/05/2005 11:27
Code(s): FSR
Wrap Text

Firstrand Limited - Momentum submits offer for Sage Firstrand Limited Registration number 1904/002186/06 ("Momentum") Share code: FSR Isin: ZAE000066304 Momentum submits offer for Sage Hillie Meyer MD Momentum Momentum Group Limited (Momentum), is pleased to announce that it has submitted an offer to the Board of Directors of Sage Group Limited (Sage) to acquire the entire issued share capital of Sage for R634 million. The offer consideration equates to 175 cents per Sage share and is roughly 80% of Sage"s published Embedded Value as at 31 December 2004. Momentum has delivered superior returns through a combination of acquisitions and organic growth. The major successful acquisitions include Lifegro and Southern Life, both of which were integrated into Momentum to the considerable benefit of all stakeholders. These selective acquisitions have enabled Momentum to improve from the 16th to the 4th largest life insurance company in South Africa over the past 15 years. The acquisitions, supported by innovative new products, service excellence and well developed distribution skills, have enabled Momentum to successfully compete in the upper-income segment of the market where it has been focusing its energy and resources since the early nineties. This strategy has paid off handsomely and Momentum is well placed for further organic growth given that it currently commands around 12% of the total South African life insurance market. It is important to note that Momentum has a relatively small presence in the market segment that is serviced by agents and the acquisition of Sage will treble its agency force and therefore presents promising growth prospects. One factor that has become critical in the battle for market share is value for money, which is, to a large extent, a function of cost efficiencies. The low- inflation environment combined with increased disclosure and consumerism has contributed towards a more competitive market. "Given this background, Momentum is open to acquisition opportunities that will complement its growth initiatives. The acquisition of Sage will substantially improve Momentum"s new business pricing competitiveness and will unlock value from both Momentum"s and Sage"s existing books. The main value drivers are the improved administration efficiencies and the increased assets under management. Whilst Momentum is already regarded as a leader with regard to the efficient use of capital, this acquisition will enable us to further leverage Momentum"s capital base." said Hillie Meyer, MD Momentum. Momentum is a wholly owned subsidiary of FirstRand, South Africa"s largest integrated financial services group. Laurie Dippenaar, CEO of FirstRand said "This acquisition is value enhancing to both Momentum and the FirstRand Group. Not only does the acquisition effectively utilise the existing capital and capacity resources of Momentum, it also provides exciting growth opportunities through an enhanced distribution network. This will enable Momentum to continue to deliver strong returns for FirstRand." Sage"s established agency force combined with Momentum"s market-leading product offering will provide strong impetus to the expansion of Momentum"s agency force. "The opportunity to grow Momentum"s agency force was identified as a promising area for organic growth well before Momentum started contemplating the acquisition of Sage." added Meyer. "We fully understand the importance of a fast and effective integration process to ensure the continuity of services to policyholders and financial advisers. Momentum"s experienced team has done this before, and is very sensitive to client needs. The intention is to integrate Sage"s business units with the corresponding businesses of Momentum. This is in line with Momentum"s business philosophy of decentralised, focused business units that understand and focus on the needs of their clients." concluded Meyer. The acquisition is subject to a number of regulatory approvals and requirements. In terms of Momentum"s offer, R120 million of the total consideration of R634 million will be held in escrow until a number of explicitly defined potential liabilities have been resolved. These potential liabilities are already being addressed and Momentum does not foresee a long delay in the resolution of these matters. Even though the Sage life company is fundamentally sound and adequately capitalised, the discontinued US venture left the group with a substantial debt burden. Sage therefore investigated and pursued a number of alternative options to address this situation. These alternatives, which included the restructuring of executive management and a successful rights offer, culminated in this transaction. It is envisaged that after the implementation of the acquisition Sage will become a wholly owned subsidiary of Momentum and that the listing of ordinary shares of Sage on the JSE will be terminated. 20 May 2005 Ends Issued on behalf of: Momentum Client Contact: Hillie Meyer (MD Momentum) And Beth van Heerden (Head: Corporate Communication) Telephone: 012 673 7325 Mobile: 082 809 2344 E-mail: bvheerden@momentum.co.za Issued By: Cordev Marketing Consultancy Contact: Mandy Laemmle Telephone: 011 783 2070 Mobile: 082 8222 494 Email: cordev@creativelife.co.za Date: 20/05/2005 11:27:05 AM Supplied by www.sharenet.co.za Produced by the JSE SENS Department

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