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Firstrand Limited - Momentum submits offer for Sage
Firstrand Limited
Registration number 1904/002186/06
(`Momentum`)
Share code: FSR
Isin: ZAE000066304
Momentum submits offer for Sage
Hillie Meyer
MD Momentum
Momentum Group Limited (Momentum), is pleased to announce that it has submitted
an offer to the Board of Directors of Sage Group Limited (Sage) to acquire the
entire issued share capital of Sage for R634 million. The offer consideration
equates to 175 cents per Sage share and is roughly 80% of Sage`s published
Embedded Value as at 31 December 2004.
Momentum has delivered superior returns through a combination of acquisitions
and organic growth. The major successful acquisitions include Lifegro and
Southern Life, both of which were integrated into Momentum to the considerable
benefit of all stakeholders. These selective acquisitions have enabled Momentum
to improve from the 16th to the 4th largest life insurance company in South
Africa over the past 15 years. The acquisitions, supported by innovative new
products, service excellence and well developed distribution skills, have
enabled Momentum to successfully compete in the upper-income segment of the
market where it has been focusing its energy and resources since the early
nineties.
This strategy has paid off handsomely and Momentum is well placed for further
organic growth given that it currently commands around 12% of the total South
African life insurance market. It is important to note that Momentum has a
relatively small presence in the market segment that is serviced by agents and
the acquisition of Sage will treble its agency force and therefore presents
promising growth prospects.
One factor that has become critical in the battle for market share is value for
money, which is, to a large extent, a function of cost efficiencies. The low-
inflation environment combined with increased disclosure and consumerism has
contributed towards a more competitive market.
`Given this background, Momentum is open to acquisition opportunities that will
complement its growth initiatives. The acquisition of Sage will substantially
improve Momentum`s new business pricing competitiveness and will unlock value
from both Momentum`s and Sage`s existing books. The main value drivers are the
improved administration efficiencies and the increased assets under management.
Whilst Momentum is already regarded as a leader with regard to the efficient use
of capital, this acquisition will enable us to further leverage Momentum`s
capital base.` said Hillie Meyer, MD Momentum.
Momentum is a wholly owned subsidiary of FirstRand, South Africa`s largest
integrated financial services group. Laurie Dippenaar, CEO of FirstRand said
`This acquisition is value enhancing to both Momentum and the FirstRand Group.
Not only does the acquisition effectively utilise the existing capital and
capacity resources of Momentum, it also provides exciting growth opportunities
through an enhanced distribution network. This will enable Momentum to continue
to deliver strong returns for FirstRand.`
Sage`s established agency force combined with Momentum`s market-leading product
offering will provide strong impetus to the expansion of Momentum`s agency
force. `The opportunity to grow Momentum`s agency force was identified as a
promising area for organic growth well before Momentum started contemplating the
acquisition of Sage.` added Meyer.
`We fully understand the importance of a fast and effective integration process
to ensure the continuity of services to policyholders and financial advisers.
Momentum`s experienced team has done this before, and is very sensitive to
client needs. The intention is to integrate Sage`s business units with the
corresponding businesses of Momentum. This is in line with Momentum`s business
philosophy of decentralised, focused business units that understand and focus on
the needs of their clients.` concluded Meyer.
The acquisition is subject to a number of regulatory approvals and requirements.
In terms of Momentum`s offer, R120 million of the total consideration of R634
million will be held in escrow until a number of explicitly defined potential
liabilities have been resolved. These potential liabilities are already being
addressed and Momentum does not foresee a long delay in the resolution of these
matters.
Even though the Sage life company is fundamentally sound and adequately
capitalised, the discontinued US venture left the group with a substantial debt
burden. Sage therefore investigated and pursued a number of alternative options
to address this situation. These alternatives, which included the restructuring
of executive management and a successful rights offer, culminated in this
transaction.
It is envisaged that after the implementation of the acquisition Sage will
become a wholly owned subsidiary of Momentum and that the listing of ordinary
shares of Sage on the JSE will be terminated.
20 May 2005
Ends
Issued on behalf of: Momentum
Client Contact: Hillie Meyer (MD Momentum)
And Beth van Heerden (Head: Corporate
Communication)
Telephone: 012 673 7325 Mobile: 082 809 2344
E-mail: bvheerden@momentum.co.za
Issued By: Cordev Marketing
Consultancy Contact: Mandy Laemmle
Telephone: 011 783 2070 Mobile: 082 8222 494
Email: cordev@creativelife.co.za
Date: 20/05/2005 11:27:05 AM
Produced by the JSE SENS Department
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