Investec does it the niche way in London
The merchant bank defies resistance to its R3.6-billion offer for Britain's Hambros, writes MARCIA KLEIN
Such a move could complicate Investec's bid as GFH's management had sufficient voting rights to block any takeover attempt, though they only own 11.5% of the company.
Investec chief executive Stephen Koseff, however, quickly stamped his authority on the company, saying GFH could not stop the deal.
"They cannot sell their shares, except to us, and they cannot force us to sell our shares (to a third party)," Koseff said.
He added management only had the right to prevent Investec from "indiscriminate action" - including firing staff indiscriminately or changing the nature of the business without management support.
GFH is an expert in global equities, fixed income securities and currencies, serving institutional and individual investors.
The Hambros deal once again puts Investec on a different path to the SA banking industry, which is merging with life assurers to form a handful of bancassurance giants.
Koseff said the acquisition is in line with Investec's mission to be an independent, international investment banking, asset management and private banking group.
The deal follows hot on the heels of Investec's announcement last month that it would pay £95-million for UK-based banking and brokerage firm Guinness Mahon from Bank of Yokohama.
After its reorganisation, which will be completed by the middle of the year and which includes a number of disposals, Hambros' activities will include asset management businesses including fund management, direct investment, private equity management and property investment.
The acquisition is partly aimed at increasing its international presence in asset management and private banking.
The Hambros deal is expected to have a positive effect on Investec's earnings. In the year to March 1997, Hambros had operating income of £540-million and reported profit after tax and minority interests of £22.2-million. Its net assets were £443.1-million. On completion of its reorganisation, it would have net assets of £388.9-million.
The group's resources give it the ability "to make acquisitions of complementary businesses".
An industry source pointed out many of SA's financial services groups had diversified into areas they were not necessarily comfortable with in order to grow, while Investec had been able to expand while still retaining its niche focus.
He said while SA's newly merged financial services giants would largely be competing for a piece of the same pie, Investec's preference for expansion offshore gave it unlimited room for growth. This gave it a competitive advantage in terms of potential earnings growth.
Investec's international operations are anchored in London and are already quite substantial. Its international expansion began with the acquisition some years ago of Allied Trust Bank, followed by Clive Discount House and a Cazenove & Co division.
Chairman Hugh Herman said while Investec's biggest presence was in the UK, it also had interests in Israel and the US and next week was opening a grassroots banking operation in Sydney, Australia.
Herman said Investec was interested in Hambros as it was well established with a good name. "Primarily we are interested in asset management, direct investment, private and corporate banking."
Although the offer totals £428-million, the reorganisation and disposal of some assets will see Investec pay much less. In December Hambros sold its bank unit to Société Générale for £300-million, and this cash and other disposals will bring the cost down. It is expected Investec will finally pay around £200-million.
The offer is conditional upon publication of Hambros' results to end March, its capital reorganisation and approval from the Johannesburg and London stock exchanges.
Investec has already received undertakings to accept the offer in respect of 16.9% of the ordinary shares and 32.9% of the preference shares.
Hambros' R200-million private equity fund in SA would not be transferred to Investec and a new ownership structure would be established soon. ý Liberty Life and Standard Bank were still in talks on their proposed R80-billion merger on Friday afternoon. Sources indicated the deal could be announced this week as the parties were close to resolving outstanding issues, including the valuation of Liberty Life shares, following the recent introduction of a new basis of accounting and the sharp surge in the value of its investments in SA Breweries and Standard Bank.