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Big-thinking Amic expects to ride wave ... Bold Wiese wins the bride after banks p... Sanlam struggles to stay upright in s... Troubled Toco in management shake-u... Lonrho's bearish forecast rattles marke... Putco gears up for tough competitio...
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Bold Wiese wins the bride after banks play the courting game
HEATHER FORMBY Looks at how South Africa's fifth-largest bank was created
JUST before Christmas, an announcement was made which meant that Christo Wiese's financial services holding company Samgro would take effective control of Natal-based NBS Bank. A chain of events was set in motion which meant a shuffle of shares between a number of banks and a life assurer. The market was kept guessing about the details of the final outcome as cautionaries were issued one after another by Rand Merchant Bank, NBS, Boland Bank, Norwich Life and, more recently, the Board of Executors. No-one was absolutely certain what the end result would be, but everyone knew it would give a new face to financial services. Two weeks ago, details of some complicated negotiations unfolded. The end result was a full-blown merger of Cape-based Boland Bank and Natal-based NBS with Samgro gaining effective control (34.9%) and a cross-shareholding between NBS, BOE and Boland. Earlier, Rand Merchant Bank pulled out and later Norwich Life cut its ties. The story really goes back to 1987 when Norwich Life demutualised and issued shares to some carefully chosen shareholders. One of these was NBS, which acquired 30% of Norwich. Norwich, in turn, bought 10% of NBS - the maximum allowed by law at that time. It was seen as a protective measure for both parties, which were fiercely guarding their independence. Like other banking/life assurance relationships - Southern Life and First National Bank, and Liberty Life and Standard Bank - they saw an opportunity to cross-sell products, something which has turned out to be successful for them. Later, when Norwich listed on the JSE in November 1995, it issued 286-million new shares and NBS's shareholding was reduced to 25%. Norwich had by then increased its stake in the bank to 22%. The cultures were similar and it seems the relationship, though not without its differences, was not an unhappy one. That is, until Rand Merchant Bank (RMB) entered the equation in July 1993. As one analyst says: "Three doesn't make a happy marriage." When RMB and NBS each took a 20% stake in the other, it is believed Norwich started getting twitchy, mostly because of RMB's relationship with competitor Momentum Life. Norwich saw its partner liaising with the enemy. At one point, though, NBS, Norwich and RMB were involved in exploratory talks about a closer relationship, but these came to nothing. But the relationship between NBS and Norwich was never really the same after that - it was a bit like Norwich's partner was having an affair on the side. Nevertheless, business continued as usual and synergies worked. It was only when retailer Christo Wiese, who had suddenly acquired an appetite for financial services, appeared on the scene that things started to change. In 1993, Wiese (who had mostly retail interests) and BOE each bought a 25% stake in Boland Bank. BOE was looking at buying more of Boland, but decided that the cultures between the two were too diverse. When Malaysian group Landmarks Berhad showed interest in Boland, BOE stood aside and ended up with 10% in Samgro with Wiese having 50.3% and Landmarks 39.6%. Samgro owned 66.5% of Boland Bank. Wiese said at that time that he wanted to expand his interests in financial services both locally and internationally. If he was thinking of the East, this didn't pan out. Landmarks also bought into the small Durban-based New Republic Bank resulting in what was seen as a conflict of interests. Wiese bought out Landmarks and landed up with 92% of Samgro. Some of his more local ambitions came to fruition in December when it was announced that a deal had been agreed on in principle between NBS and Boland Bank and would be effective from May 1 this year. This came after weeks of speculation as to what the deal would entail - a full-blown merger or a mere strategic alliance - and whether RMB would be involved in the new grouping. Analysts saw RMB's strengths in merchant banking, treasury and asset management as offering another leg to the new banking group. NBS had a healthy home-loan book and a strong presence in Natal while Boland offered its clearing, forex and card facilities, and its branch network, mostly in the Western Cape. And both spoke about the prospects of using Wiese's retail interests - including Shoprite and Pep Stores - to sell financial services on similar lines to Marks & Spencer, Sainsburys and Tesco in the UK. However, RMB decided the group was moving in a direction it didn't want to go. It consequently gave Samgro the option to acquire its 20% stake in NBS (Samgro exercised this right earlier this month) realising cash of R1.3-billion for RMB and over R800-million net profit. In addition, Samgro acquired 5.6% of NBS from the Eskom Pension Fund. A few weeks after the deal was first announced, NBS acquired Boland's financial assets. What has become evident in the interim is that Wiese was banking on linking up with NBS's long-term partner, Norwich Life. What he didn't know, was that Norwich wanted out. In a move which took everyone by surprise, Norwich announced it was exercising its option to place NBS's shares in Norwich with shareholders of its choice. This was the result of a shareholders' agreement it had in place with NBS to protect it against the shares ending up in hostile hands. Norwich politely said it thought cultures were different, but it is believed it didn't like the idea of not being in control of its own destiny. And to be fair, Norwich aims mostly at the A/B income markets whereas Wiese's retail stores are aimed far lower. In February, Norwich placed NBS's 25% stake with 15 unnamed shareholders, two of which were black empowerment groups. But two days before this happened, a party, as yet unconnected to the deal, showed its hand. BOE, which has done many a transaction for - and with - Wiese issued a cautionary and confirmed that it was involved in negotiations in what had become known as NBS Boland. Norwich still had its 22% stake in NBS so it was speculated that BOE might buy this. Speculation about deals with black empowerment groups and international banks were also rife as the market waited to hear how the NBS Boland and now BOE deal would pan out. Then two weeks ago, it all became clear. As expected, Samgro will gain effective control of NBS Boland with a 34.9% stake once it exercises its option by October 26 to place Norwich's shares in NBS. The deal means NBS Boland will become SA's fifth-largest banking group with assets of R26-billion. BOE announced at the same time that it would buy what will end up as 17.2% in NBS Boland while NBS Boland will have a 24.3% interest in the BOE group. The question is how long before it showed its hand was BOE involved in the deal, bearing in mind its close relationship with Wiese. BOE NatWest was the corporate adviser to Samgro and Boland in the NBS deal, so knew all along what was in store. It obviously liked what it saw, and figures produced assuming the acquisition had been in place in September 1996 show a superb growth in BOE's earnings and net asset value a share. BOE executive chairman Bill McAdam sees the deal as a strategic investment which will contribute to long-term growth in earnings a share - and the two see major cross-selling opportunities. Clearly this is not the last word from the new group. McAdam ended his press announcement with the words "'one can expect further developments" while Wiese has publicly stated that he would like to expand his financial services interests abroad. But while the higher echelons are doing deals on a macro-scale, NBS Boland has to bed down the merger and fulfil its ambitions of providing in-store financial services in Wiese's group of retail chains. This perhaps won't be as much of a doddle as was at first thought. Shoprite's Whitey Basson says NBS Boland will have to tender for the Shoprite business along with others. "We're looking for what's best for the customer," he says. NBS Boland has, however, already acquired business from Pick 'n Pay to launch its first financial services product. Aside from this new banking group, action can be expected from the parties who decided to go their own ways. RMB is cash flush with its earnings from the sale of NBS shares. It could enter into some kind of strategic alliance with an international player and it has said it is interested in retail banking, but wants it without the problems of existing (outdated in some instances) technology and branch networks. Norwich, in turn, won't be sitting back. It would also very much like some international connection and has spoken abut increasing its black empowerment connections. Don't expect a quiet year in financial services. Top of page
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