South Africa-based Rand Merchant Investment Holdings Ltd. will acquire a 29.9% stake in U.K.-based Hastings Group Holdings Plc, the companies announced Dec. 14.
Rand Merchant Investment will pay between 248 pence and 255 pence per share for the stake, representing an aggregate cash consideration of £487.3 million to £499.5 million, the South African insurer said. The shares will be acquired from individual shareholders as well as principal shareholder Hastings Investco Ltd., which is controlled by Goldman Sachs Group Inc.'s merchant banking division and had a 51.4% stake in the company as of Dec. 13.
On completion, the deal will make Rand Merchant Investment the largest shareholder in Hastings Group Holdings. The South African firm said the move was part of its strategy to look for a "fourth pillar" for its investment portfolio, which already includes South Africa's Discovery Ltd., MMI Holdings Ltd. and OUTsurance Holdings Ltd.
The current deal follows a recent sale of a roughly 7% stake in Hastings Group Holdings for 216 pence per share by investors including Hastings Investco Ltd. Following the Rand Merchant Investment transaction, the company's Goldman Sachs-affiliated shareholders will control about 22.6% of its voting rights, while its founder shareholders will control about 13.2%.
A relationship agreement signed with Hastings Group allows Rand Merchant Investment to appoint a director and an observer to the U.K.-based insurer's board, subject to certain investment threshold conditions. Rand Merchant Investment CEO Herman Bosman will be the initial director nominee, and Willem Roos, CEO of OUTsurance Holdings, will be the first observer.
Rand Merchant Investment noted that OUTsurance's business model is similar to that of Hastings, particularly in respect of their use of "dynamic and analytical approaches to risk underwriting and the use of modern direct distribution channels." Hastings and OUTsurance have identified avenues of potential collaboration, including the sharing of best practices.
Rand Merchant Investment will fund the deal through a debt facility fully underwritten by Rand Merchant Bank.
Hastings said the transaction is expected to be completed on or before May 2, 2017, while Rand Merchant Investment said the acquisition would be finalized by April 30, 2017. It is subject to approval from the South African Reserve Bank's Financial Surveillance Department, the U.K.'s Financial Conduct Authority and the Gibraltar Financial Services Commission, the companies said.