Patrice Motsepe's ARC spends another R400m on acquisitions

Patrice Motsepe’s African Rainbow Capital says it spent another R399 million in the six months to December buying new businesses and increasing its stakes in companies it already owned.

The investment holding company, led by two former Sanlam executives, Johan van Zyl and Johan van der Merwe, owns stakes in companies including TymeBank, mobile network operator Rain, Alexander Forbes, and secondary stock exchange A2X, to name a few.

Financial service companies make up 28% of its investment portfolio, while the rest is diversified investments, from agriculture producers to construction, mining and even panel beaters. ARC recently announced in January that it would be buying over R1 billion in Alexander Forbes shares, a transaction that will make the company a new majority shareholder of the pension funds administrator once concluded. That transaction did not form part of the R399 million the company spent on acquisitions in the six months to December.

ARC said most of the R399 million went into giving capital injection to TymeBank, the branchless digital bank that was launched to the public in February last year. The company said the ARC Fund contributed R150 million capital injection to the bank. ARC said TymeBank had signed on 1.1 million customers at the end of December, of which 440 000 are active.

The company, through its subsidiary ARC FinHoldCo, also spent R159 million acquiring a 25% shareholding in specialist financial services firm Capital Legacy, which specialises in the drafting of wills and estate administration. Over the same period, ARC disposed R60 million worth of investments it previously owned, including a number of shares at Santam, which saw the company walk away with a R21 million profit after paying capital gains tax.

The acquisitions and disposals, coupled with valuation gains on investments like Rain, saw ARC Fund’s intrinsic value increased by 1.9% from 30 June 2019 to R9.93 billion as at 31 December 2019. The company’s intrinsic net asset value per share – a measure of what the company’s actual assets and investments are worth – increased to R9.52 per share from R9.34 per share in 30 June 2019, representing a 1.9% growth.

However, at roughly R2 per share, ARC’s stock still trades at huge discount to the on the JSE. While this is common for investment holding companies, ARC’s discount is widening. Even before the market turmoil caused by the coronavirus, ARC’s shares traded at around R5.50 a year ago. The price fell by 6.5% after the results were published on Thursday morning to R1.95.

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