On Monday morning Rand Merchant Investment (RMI) announced plans to unbundle its large stakes in Discovery and Momentum Metropolitan directly to its shareholders.
RMI is currently the largest shareholder in both companies, owning 25% of Discovery and 27% of Momentum Metropolitan. Following the unbundling, RMI shareholders will hold shares in these companies directly.
The RMI board hopes this move will unlock "material shareholder value" by shrinking the discount at which RMI currently trades to its underlying intrinsic value.
RMI's shares jumped 14% to R35.26 in opening trading on Monday.
The unbundling will also establish RMI as a focused property and casualty insurance investment group, "with exposure to, and influence over" unlisted insurers in South Africa, Australia and the UK via OUTsurance, Youi and Hastings. RMI owns 89% of OUTsurance.
RMI says it has received support in principle from investors who hold 65% of the company – including from RMI's largest shareholders Remgro and Royal Bafokeng, as well as the founders of the RMB group (Laurie Dippenaar, Paul Harris, GT Ferreira and Pat Goss) and Coronation, Allan Gray and Abax Investments.
The unbundling is expected to be completed by the end of the second quarter of 2022.
The Rand Merchant group of companies has held stakes in both companies since the early 1990s. The group bought a controlling interest in Momentum Metropolitan in 1992 and also provided Adrian Gore and Barry Swartzberg with the seed funding and the life insurance license to build Discovery in 1993.
The company also plans to issue shares worth R6.5 billion, "to optimise RMI's capital structure".
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