FirstRand unbundling is the end of an era, Johann Rupert says

Remgro chair Johann Rupert said on Wednesday it is the “end of an era” as his investment holding company and Rand Merchant Bank Holdings (RMH) prepare to unbundle their stakes in the country’s largest financial institution by market capitalisation, FirstRand.

Rupert was reflecting on the 40 years that have passed because he founded Rand Merchant Bank in 1979, saying he considers his decision to swap shares in Anglo American’s mining businesses for shares in the financial services company in the early 1990s as one of the best of his career, despite significant internal opposition within Remgro to it.

“Once I went down one of the shafts and realised what a tough business it was, I knew it was not possible to simultaneously run a consumer goods company and a mining business,” he said.

Rupert famously backed GT Ferreira, Laurie Dippenaar and Paul Harris who founded FirstRand and grew it into the R378bn financial services powerhouse that it is now.  

With the three no longer serving as executives or directors of FirstRand — Dippenaar and Harris will shortly retire as nonexecutive directors of RMH —  Rupert said the time has come to unwind the structure.

“We simply can’t have 40% of our net asset value tied up in a business where we have no control or influence, nor that we have sought to influence. It just no longer made sense for us,” Rupert said.

Remgro CEO Jannie Durand agreed that FirstRand has outgrown the structure.  

“FirstRand is now like a child that has grown up and left home. With the costs of the structure outweighing the benefits, the time has come to unbundle it…,”  Durand said.

The company will continue to explore the most effective way to put the shares of FirstRand into the hands of Remgro’s shareholders and expects to table the proposed way forward by end-February next year, he said.

The landmark decision will lead to more scrutiny of other listed holding company structures in the country, most notably PSG’s shareholding in Capitec.

This is according to Shane Watkins, chief investment officer of All Weather Capital that lobbied Remgro to unwind the structure in place for FirstRand.

Watkins applauded Remgro and RMH for listening to investors, but thinks it is inevitable that all holding companies that trade at persistent discounts to the sum of their underlying investments will ultimately abolish these structures.

“It is like trying to defy gravity,” Watkins said.

FirstRand closed 1.53% weaker at R67.50, while Remgro rose more than 6% to R196 per share, its best performance in more than six years. RMH closed 4.62% higher at R87 per share, its biggest one-day gain since September 16.

thompsonw@businesslive.co.za