| Fri 16 May 2003, 10:18 | | Investec sets the pace in banking empowerment |
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Group meets black ownership criteria in one move
Financial Services Editor
THERE has been plenty of empowerment action in the financial services sector lately, with a stream of deals concluded in asset management and investment banking.
But the stakes have been raised in the banking sector, with Investec, SA's fifthlargest bank, concluding a deal that will bring empowerment players in to hold 25% of its equity. In one move it will have complied with the ownership criteria set out by the trade and industry department's newly released guidelines for a "black-empowered company".
Other "big five" banking groups like Nedcor and Standard Bank have undertaken empowerment transactions in parts of their businesses, bringing strategic empowerment partners into their asset management or mass market banking arms or creating new empowerment joint ventures in investment banking.
Investec, however, has done its empowerment deal at the top, bringing its partners Tiso, Peu and the Entrepreneurship Development Trust in as shareholders of the group itself.
A key reason Investec can do this while big-five rivals cannot, is that its market capitalisation is much smaller than theirs. The deal is worth just more than R1bn, with Peu, Tiso and the trust putting in R810m and Investec's black staff taking the rest.
But buying 25% of one of the other big banks Absa, FirstRand, Nedcor or Standard would cost up to R10bn, well beyond the value of financial-services empowerment deals so far.
In doing the deal Investec is benefiting, ironically, from a low share price. In rand terms, its price has plummeted over the past year, to about R90 from about R160 at the time of its London listing in July. This makes the deal affordable for the empowerment partners, and reduces the risk in financing the deal.
Investec's complex duallisted structure with London and SA share registers also made it easier to do a deal involving more than 25% of its SA shares.
But if Investec is better placed than bigger banks to do such a deal, there is also a sense in which it has more need to. The empowerment charter for financial services, being drafted by the sector, will focus not just on ownership and the other usual criteria. It will also have a heavy emphasis on broadening access to financial services to bring the previously unbanked or underserved into the system.
Investec is a specialised investment banking group, doing retail banking only at the top end through Investec Private Bank. The mass market is not its territory, nor is it likely to be. But it has taken action in all other empowerment areas.
CE Stephen Koseff emphasised yesterday that the equity deal was part of a comprehensive empowerment process in the group, which began this two years ago. Investec was not keen to bring in joint venture partners or form empowerment alliances in parts of its business as have other banks as it wanted to avoid conflicts of interest within the group.
Whatever its reasons, there is no doubt Investec's move will set a benchmark for the banking industry.
May 16 2003 07:10:59:000AM Hilary Joffe Business Day 1st Edition
Friday
16 May 2003
