Momentum`s Meyer hits mark with Sage deal
May 23, 2005
Johannesburg - Garth Griffin, the chief executive who has just put the Sage Group back on its feet, is leaving the company following its sale to FirstRand`s Momentum Group, the country`s fourth-biggest life assurer.
Momentum said on Friday that it had offered R634 million for the entire issued share capital of Sage, which was left with a substantial debt burden after its US expansion failed. Momentum`s R1.75 a share offer represented 80 percent of Sage`s embedded value of R2.18 a share.
Sage shares fell 14c to close at R1.59 on Friday. The life assurance sector lost 0.47 percent. FirstRand shares closed 18c firmer at R14. The banks sector gained 0.5 percent.
When he joined Sage about two years ago, Griffin made it clear he was not priming Sage for a takeover but rather for long-term recovery. While his two lieutenants - Leon Kaplan, executive director of finance and investments, and Janssen Davies, chief executive of African operations - have already discussed their futures with Momentum, Griffin is expected to join Sage chairman Danie Cronje at Absa.
The futures of the 750 people who will not be incorporated into Momentum also lie in the balance.
Hillie Meyer, the managing director of Momentum, did not hide the fact that Sage`s 550-strong sales force was what Momentum was after. He said the purchase of Sage would treble Momentum`s agency force from 290 to 840, accelerating delivery of the group`s target to increase its agents to 1 000.
Meyer said the Sage name would disappear. The sale of policies would stop almost immediately and once the deal was complete, Sage would be delisted from the JSE Securities Exchange.
Sage is about 10 percent the size of Momentum. Meyer said the purchase should bring down the average cost of policies by 10 percent. `We are getting 12 percent more revenue for 5 percent more expense.`
Momentum said it did not need to go to the market for funding. The acquisition would be done by means of a scheme of arrangement and Sage shareholders would be paid in cash.
Meyer said Sage`s key shareholders, Absa and Remgro, which hold 37.8 percent between them, as well as the Mines Pension Funds and Purple Capital Consortium, which hold 16.5 percent and 19.2 percent in Sage respectively, had given the acquisition their blessing.
But because of Sage`s financial history, Momentum would hold R120 million of the purchase price back as security until potential tax-related liabilities had been resolved.
Laurie Dippenaar, the chief executive of FirstRand, said not only did the acquisition effectively use Momentum`s existing capital resources, it also provided exciting growth opportunities through an enhanced distribution network.
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