LETTER: Standard Bank, Liberty merger could have unintended consequences
Holding companies are out of favour on the JSE and several are unbundling assets to avoid value discounts
Stephen Cranston brilliantly outlines the history between Standard Bank Group and Liberty, and further predicts that under the full control of the bank Liberty could make some tangible inroads to the mass market (“Standard Bank partly to blame for Liberty’s fall from grace”, July 15).
I agree with his analysis. However, the buying out of minority shareholders and possibly delisting Liberty from the JSE may have unintended consequences. With Standard Bank (banking), Stanlib (asset management) and Liberty (life insurance) being unlisted entities under its full control, Standard Bank Group may trade at a discount to its underlying value even though the group is the only entry point to the listed shares.
Judging by trends in the JSE, my prediction is that the banking entity will contribute more than two-thirds of the group’s revenue, overshadowing Stanlib and Liberty, and thus the market may only take into account the banking entity and disregard the asset manger and insurer.
By taking full control of Liberty, Standard Bank Group is going against prevailing trend on the JSE, where the tide seems to have gone out for holding companies. After experiencing huge discount gaps, holding companies have been unbundling their assets so that investors will be forced to value the remaining businesses in the portfolio.
It is on this premise that PSG unbundled Capitec, Naspers unbundled MultiChoice and its internet businesses, and Remgro Group unbundled its 28% stake in RMB Holdings. MTN Group is considering hiving off its fintech business and listing it separately to unlock its value. Long4Life and Brait are also considering unbundling some of their businesses with the hope that their share prices will better reflect the underlying value of the assets and enable them to make more retail acquisitions.
Prof Rabelani Dagada
University of Johannesburg
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