| Mon 7 Jul 2003, 9:55 | | AMB mulls the lonely life of an investment wallflo |
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AMB mulls the lonely life of an investment wallflower
The group has overhauled and refocused but lacks a future vision, writes Richard Stovin-Bradford
Empowerment investment house AMB Holdings has undergone the mother of all corporate clean-ups in the past year. It has gone back to basics and done most of the things the market wanted it to do.
But its interims to March will disappoint some investors because they show no sign of it being closer to achieving clarity on its long-term plans.
Business Times wrote in May that AMBH still needed to forge a business plan for the long haul. But two months later the radically overhauled group continues to mull three main options.
These include going it alone as an independent listed advisory boutique, with Allan Gray as a 35% shareholder and Investec as the financier of an eventual consortium of "value-adding" empowerment shareholders and staff that would hold a further 28%.
The second option for AMBH is to do the same but as an unlisted boutique, free of the compliance costs of listing.
A third, less likely option is to attract a sugar-daddy financial institution, a bank or a life assurer, to take a majority stake in the business, perhaps alongside an empowerment group.
The likelihood of this option has declined in recent months as potential partner institutions have been launching their own empowerment initiatives instead of taking advantage of AMBH's positioning and track record in the empowerment arena.
Bankers at the big four banks, mindful of the scorecard in the sector empowerment charter, question whether buying AMBH would improve their empowerment credentials.
AMB Advisory Services (Ambas) - the new name for the group's remaining operating businesses - has made advice-giving on empowerment transactions its hallmark, yet its own empowerment credentials have largely evaporated.
With the recent exit of Pamodzi and its 7.75% stake in AMBH, the firm's residual empowerment credentials rest with the myriad small shareholders who inherited shares in AMBH when its previous empowerment partner, Nail, unbundled its stake.
Chief executive Andrew Sprague is sanguine about the outlook, saying: "The problem is we're in a bear market. The real progress has been on restructuring. We've turned what was a very unfocused, unprofitable group into a very small, niched but profitable group.
"Going forward, we see a place for a niche player that can generate an acceptable return on equity which will be rewarded over time. Clearly in this market things are unlikely to change overnight."
At least today's AMBH can claim to be an easier investment proposition to evaluate now that it has surrendered its banking licence, reshaped its activities into debt and equity advisory services, fund management and trading operations, and slashed costs in half.
AMBH's determination to return surplus capital to shareholders may make the group less attractive as a ready-made rights issue to an asset-stripping buyer, but the move should keep long-suffering shareholders sweet until AMBH settles on its final shape.
A tireless Sprague and his team have not let the makeover of AMBH take their eye off the ball. This much was clear from the 47% leap in revenue to R88-million as fee and commission income remained firm. AMBH reported a swing to a net operating income of R49.4-million.
But it had to provide against a Telkom investment made two years ago when expectations of making a significant return on the listing ran high, before global sentiment turned against telecommunications stocks.
However, Ambas managed to earn a fee for its advice on Telkom's initial public offering.
The delisting of private equity arm AMB-PEP is at last within reach after shareholders voted overwhelmingly to back a scheme of arrangement to buy out minorities. The delisting brings to a close one more unfulfilling chapter in AMBH's history, just as surrendering the banking licence ended an earlier chapter on its unsuccessful foray into the banking arena.
AMBH's private equity business can assume a more appropriately low profile, safe in the knowledge that the external shareholders that have chosen to stay on board are committed for the long haul.
Sprague concedes that once the AMB-PEP delisting has been achieved and cash returned to shareholders, AMBH will be at another crossroads. "Then will be the time to sit down with the major shareholders and decide what works for all parties."
Meanwhile, a short walk down Fricker Road from AMBH's offices in Johannesburg's trendy new financial hub, listed private equity firm Brait has made its first significant empowerment foray.
In a deal that should oil the wheels of empowerment, the boutique investment bank has helped raise R250-million of private equity funding for black investment firm Medu Capital - in which it has a 49% interest - to invest in small- and medium-size companies looking for empowerment partners.
