Investec [JSE:INL] is spinning off its asset-management unit after a strategic review found there is little synergy with its banking and wealth and investment divisions. The stock rallied the most in nine years.
Investec Asset Management, which oversees $143bn across its offices in the UK, South Africa, Australia and the US, will be headed by the money manager’s founding chief executive officer, Hendrik du Toit, Investec said in a statement on Friday. The remaining businesses will be headed by Fani Titi.
The company plans to trade the money manager’s securities in London with another listing in Johannesburg as Investec’s founding chiefs, Stephen Koseff and Bernard Kantor, prepare to step down next month after more than 40 years with the company. It follows a similar step by Deutsche Bank AG, which in March spun off its asset management unit, and a split by Old Mutual Plc that broke up its UK wealth management and African banking and insurance businesses.
This is a “very positive” move that will help Investec Asset Management achieve a higher valuation than within the larger group, said Richard Hasson, a money manager at Electus Fund Managers in Cape Town. Investec Asset Management “has been one of the biggest asset gatherers as a percentage of their assets under management over the last 10 years so it really has been a good story.”
Shares in Investec jumped as much as 13%, the biggest increase since March 2009. They were trading 8.6% up at R102.20 as of 11:26 on the JSE.
Investec Asset Management accounted for about a third of operating profit in the 12 months through March. The division will probably report earnings for the six months through September 30 that will be “ahead of” the year earlier period.
Investec’s specialist banking division, which accounts for more than 70% of its operating earnings, will also post better fiscal first-half profit than a year ago, mainly because of an improved performance from its UK business. Wealth and investment is lagging last year’s interim earnings, Investec said.
‘One of our Children’
The separation of the asset-management unit will support the next phase of its development, Koseff and Kantor said in the statement. While the precise mechanics of the “demerger and listing” still need to be finalised, the company is hoping to complete within 12 months, subject to regulatory approvals, Koseff said on a conference call.
“It is like letting one of our children go,” he said. “We have been building this business with Hendrik for the past 28 years.”
The management of Investec Asset Management will retain their stake in the business, while Investec may keep a minority stake in the money manager, the company said. JPMorgan Chase and Fenchurch Advisory Partners are advising on the transaction.
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