Alec Hogg
South Africa’s largest banking group, FirstRand, has emerged as the most likely
buyer of the niche bank Saambou, which at current market prices is worth about
R2-billion. This emerged earlier this week as the bank that had been the favourite to buy Saambou ruled itself out of the game. Absa Group CEO Nallie
Bosman was emphatic: “We did have a look at Saambou, but it doesn’t appeal to us at the moment.”
This is the second likely bidder to announce it is not in line to buy Saambou
following early favourite BoE’s definite “no” from CEO Tom Boardman last week.
There has been much speculation surrounding the future of Saambou ever since
effective controlling shareholder Fedsure was acquired by the Investec Group.
From day one Investec said its 45% inherited stake in Saambou was for sale.
United States financial services giant Citigroup has been touted as another likely predator following aggressive moves into expanding its South African presence. What counts against a deal with Citigroup, however, is the culture of
Saambou, whose very name (“Build together”) reflects its strong links with the
Afrikaans-speaking community, with its history of not fully trusting foreigners.
That would suggest all concerned may find an agreement with a local operation
more palatable.
Simon Tippett, who is responsible for assessing the financial services sector at the country’s largest asset management company, Old Mutual, makes FirstRand a
strong favourite. He reckoned this group is now “top of the list” of potential
buyers for Saambou. Among the motivations, he says, would be Saambou’s strength
in the micro-lending sector, one part of the banking spectrum where FirstRand
currently has no exposure.
Tippett does not see any quick buck for punters though. He warns that most of
the takeover premium is already in the Saambou share price, which has risen from
930c in December to more than 1300c. Part of his motivation is the Saambou share
price improvement, which has taken the stock to a price: earnings ratio of about
nine times in line with Absa and higher than BoE. FirstRand shares, however,
trade at a price: earnings ratio of 14 times, providing scope to make a relatively attractive offer to Saambou shareholders and still conclude a transaction that will enhance the bigger group’s earnings.
Any deal on Saambou would come as welcome news for Investec, whose share price
has been under pressure (R270 in February; now R228) since the announcement of
its takeover of troubled life assurer Fedsure. A deal on the Saambou stake would
remove another item of uncertainty from a takeover whose wisdom has been widely
questioned.
ENDS