FirstRand to look offshore for funding
--------------------------------------------------------------------------------
Financial Services Editor
FINANCIAL services group FirstRand is casting its nets wider than SA for the billions of rand in finance it will need to fund an empowerment deal, which it expects to announce later this year.
CEO Laurie Dippenaar said yesterday that the group was approaching overseas development agencies to try to raise third-party funding for the deal. Rand Merchant Bank, a division of FirstRand, was assisting in structuring the deal, he said.
The third-party model FirstRand plans to use will be significantly different to those used by Absa and Standard Bank in their empowerment deals. Absa linked the financing of its deal to share options, while Standard Bank provided vendor finance.
An analyst, who declined to be named, said that by raising thirdparty funding FirstRand would not take the risk on its own balance sheet. `It`s much cleaner, and certainly the way empowerment would be financed in an ideal world,` he said.
Financial services companies agreed last year to sell a quarter of their business to black empowerment partners under the Financial Sector Charter.
Dippenaar said any deal would probably exclude Discovery Health, which is 63% owned by FirstRand, and it would embark on its own empowerment initiative.
Stripping out the Discovery stake would result in an empowerment deal of about R5bn.
Absa`s deal was valued at between R3,5bn and R5bn depending on how the group`s share price does over the next three to five years, while Standard Bank`s and Liberty Group`s empowerment combined transaction was valued at R5,4bn.
Dippenaar said that FNB Namibia, which is listed on the Namibian Stock Exchange, may also have to structure its own empowerment deal.
`Namibia is also going the empowerment route, and would want to have a deal separate from the one we announce here,` he pointed out.
Dippenaar confirmed that the partners who would make up the broad-based empowerment grouping that would take up a stake in FirstRand were largely in place. `It is going the third-party route that has been the most difficult part of the transaction,` he said.
Last month the market was taken by surprise when Cyril Ramaphosa resigned from the FirstRand board to take part in Standard Bank`s and Liberty Group`s empowerment deals.
Ramaphosa had widely been expected to be part of FirstRand`s own deal. Chairman GT Ferreira said at the time that the group had known for some time that Ramaphosa would not be participating and had continued structuring the deal without him.
Ferreira said that FirstRand`s deal would not revolve around any individual player or empowerment company, however.
Aug 04 2004 07:16:36:000AM Stephen Gunnion Business Day 1st Edition
Profile Group (Pty) Ltd. has taken care in preparing all information on this website, but does not accept any liability for errors or out-of-date information.
