South African banking group Nedcor on Wednesday announced the sale of the corporate law advisory and consultancy business of Edward Nathan & Friedland (ENF), acquired by the group in October 1999.
ENF has been sold, with effect from October 31 2004, for a cash consideration of R50-million to Edward Nathan, which is owned by the 47 directors of the business.
Nedcor’s strategy is to focus on its core banking business and ENF is not regarded as a core business, the banking group said.
Considering all relevant factors — including the need to structure the business of Edward Nathan to continue to attract, retain and properly incentivise professional staff and the expiry of the service contracts of key directors of ENF on December 31 2004 — it is the view of the Nedcor board of directors that this transaction represents the best strategic outcome for Nedcor shareholders.
In addition to the purchase price of R50-million, the available cash in ENF of R33-million will be paid back to Nedbank in part settlement of the ENF loan account.
The overall effect of the sale of ENF will be a loss to the Nedcor group of R20-million in 2004.
In terms of the agreements, neither Nedcor nor its subsidiaries will provide funding for the acquisition by the directors.
No member of the Nedcor group has provided any warranties in respect of the acquisition by the directors.
Professor Michael Katz is one of the directors of Edward Nathan and has undertaken to remain with Edward Nathan. He remains vice-chairperson and a non-executive director of the Nedcor and Nedbank boards.
Both Edward Nathan and Nedcor will continue to refer work to each other where appropriate, provided this does not create any conflicts with clients or breach client confidentiality.
The Nedcor board requested Ernst & Young Corporate Finance to conduct an independent assessment of the transaction for purposes of good governance.
Following the conclusion of their procedures, Ernst & Young Corporate Finance is of the opinion that the transaction has been concluded at the lower end of their fair value range.
However, after considering relevant qualitative factors, Ernst & Young Corporate Finance has nevertheless concluded that the transaction is fair and reasonable. — I-Net Bridge