The 145-year-old US insurance and investment giant Prudential is buying a 15% stake in Alexander Forbes, and wants to eventually expand its holdings to a third of the company.
Alexander Forbes announced on Friday morning that Prudential had reached an agreement, through its investment manager LeapFrog Investments, to buy the stake from Mercer Africa, a subsidiary of Marsh McLennan Companies. The deal is still subject to regulatory approvals.
Prudential Financial also plans to make a "partial offer" to shareholders to buy a 33% stake in Alexander Forbes.
But Patrice Motsepe’s African Rainbow Capital (ARC), the current majority shareholder at Alexander Forbes, with a 40% stake, has "irrevocably undertaken" to not accept the partial offer from the Fortune 500 firm.
Prudential is buying Mercer's shares for R5.25 a share. Alexander Forbes shares were trading around R3.71 on Thursday.
On Friday morning, Alexander Forbes shares jumped 22% to R4.60.
Prudential Financial has more than $1.5 trillion in assets under management as of 31 December 2021, and has operations in 40 countries across the US, Asia, Europe, and Latin America.
"We are excited to broaden our presence in Africa and enter South Africa with an investment in Alexander Forbes through our partnership with LeapFrog Investments," said Pavan Dhamija, Prudential Financial’s regional president
"We identified Alexander Forbes as the market leader in South Africa best capable of advancing our vision and strategy."
Alexander Forbes CEO Dawie de Villiers said the deal showed how companies with the "calibre" of Prudential Financial and LeapFrog, believe in the SA company’s vision.
"The conviction of our long-term strategic shareholders, including ARC, can provide confidence to the market in the investment case for Alexander Forbes as we accelerate our transformation towards becoming the most impactful provider of financial advice to institutional clients and individual customers."