Shareholder equity to rise as Imara pockets P100 million in the sale of a subsidiary

Imara Holdings Limited, a Botswana registered and Botswana Stock Exchange listed management-controlled African investment banking group, will sell its South African subsidiary, Imara S.P Reid, to MMI Strategic Investments for a whopping ZAR120 million (about BWP100 million).

Imara emerged from the African operations of Robert Fleming Holdings UK in 2002. According to Imara’s website, upon entering the African market, Flemings made a number of acquisitions through which it established three areas of key competence; Asset Management, Corporate Finance and Securities Broking in Botswana, Malawi, Mauritius, Namibia, South Africa and Zimbabwe. In August 2000, Flemings announced its acquisition by Chase Manhattan Bank, which immediately merged with JP Morgan, which, on review, announced its intention to dispose of its holdings in the African operations. By October 2002, JV partners had purchased the businesses and the management consortium, which was responsible for the largest Flemings business in the region, and re-branded the business as Imara. The new Group’s holding company, Imara Holdings, was incorporated in Botswana under the Integrated Financial Services Centre. In Botswana, Imara operates a Corporate Advisory business focussed on both the domestic Botswana as well as the regional corporate sectors. It has its headquarters in Gaborone and is regulated by Botswana’s Non-Bank Financial Institutions Regulatory Authority.

The buyer, MMI Strategic Investments, is a subsidiary of MMI Holdings Limited, a South African financial services company. MMI’s core business currently comprises of long and short term insurance, asset management, savings, investment, healthcare administration, health risk management, employee benefits, and rewards programmes. The rationale for the acquisition of Imara SP Reid is MMI’s entrance into the stockbroking and portfolio management industry, which is viewed as a long term growth strategy for the company. This acquisition enables MMI to take an established position in the retail stockbroking market, allowing MMI to offer a comprehensive suite of investment products to their clients.

A statement from the company points to online share trading, escalating regulatory and compliance costs, together with generally changing market dynamics having led to growing pressure and competition for independent stockbroking companies in South Africa as the factor that led to the board’s decision to sell. Also, according to the statement, the board considered several proposals during the disposal process and believes the proposal from MMI Strategic Investments, which is at a premium in excess of 40% to the current Net Asset Value of the company, makes the disposal attractive to Imara Holdings. The statement further states that the board “reviewed various options relating to the company and its future earnings contribution to the group. These included the investment of further working capital required by the Company for additional carry facilities and the forth coming shorter settlement period being introduced by the Johannesburg Stock Exchange, and, as an alternative, the disposal of the company. The board’s view was that the company needed a parent willing and able to fund its growth needs,” hence the decision to sell.

On the 24th of March, the company held a shareholders meeting in Gaborone to seek approval for the sale. The meeting, where 79.5% of shareholders were in attendance, approved the disposal of Imara SP Reid. The statement from the company had mentioned that “… the balance of the proceeds, amounting to BWP69.8 million, will be invested into the business versus a return of surplus capital to shareholders.” In light of this, Gazette Business wanted to establish what areas of the business the proceeds will be invested in and an estimate of how much value, in terms of growth in equity, the company targets to achieve. The Company Secretary, Dave Stone, and the only person, according to company policy, who could field questions from the media was away in Johannesburg and could not take our questions. The report for the half year financial results ended 31 October 2014 pegged the company’s net asset value per share at P2.49. Gazette Business also wanted to establish what the shareholders reaction was to the sale proceeds being re-invested as opposed to distributing them to shareholders.