FirstRand offers to buy back preference shares

FirstRand, SA’s largest banking group by market value, has offered to buy back preference shares in line with the implementation of the Basel III framework, which seeks to phase out these instruments over time.

Following the implementation of the Basel III framework and the proposed phasing out of these instruments over a 10-year period, the preference shares no longer qualified as regulatory capital from January 1 2022. As a result, FirstRand said it does not consider it appropriate to continue to have the preference shares as part of its issued share capital structure.

Due to the limited market for preference shares in general, which results in low liquidity and trading volumes, there are limited opportunities for preference shareholders to dispose of them on the JSE, the company said in a statement on Friday.

The proposed repurchase of the preference shares provides holders thereof a single opportunity to monetise their preference shares at a premium of 8.7% to the closing price of R91.99 as at July 7 2022,  In addition FirstRand will pay any accrued dividend until settlement date.

"There are two alternative but concurrent offers by FirstRand to acquire all the issued preference shares. Either a scheme of arrangement or a general offer: both offers are at R100 per share which represents the full par value,” said Sam Moss, head of investor relations at FirstRand.

In accordance with regulatory requirements, an independent board has been formed which has appointed KPMG to provide independent external advice in relation to both offers.

FirstRand will use internal available resources to fund either offer. In accordance with required regulations, FirstRand has provided guarantees to satisfy payment of the maximum possible consideration in respect of the repurchase.

FirstRand shares ended 0.84% higher at R63.93 on the JSE on Friday, giving it a market valuation of R358.6bn.

mahlangua@businesslive.co.za