Metropolitan upbeat about merger with Momentum

Staff Writer | Wednesday April 21, 2010 00:00

 

An agreement reached in March to merge the two insurers will be implemented by FirstRand selling its entire issued ordinary share capital of Momentum to Metropolitan in consideration for which Metropolitan will issue new Metropolitan ordinary shares to FirstRand.

In a statement released yesterday, Metropolitan Botswana Spokesperson Diphuka Osman said the merger would create one of the leading financial services groups on the African continent of which Metropolitan Botswana would be a part.

'A due diligence process has begun after the successful completion of which the proposed merger will still be subject to approval by Metropolitan and FirstRand shareholders, as well as the relevant regulatory authorities. Our local shareholder, the Botswana Development Corporation, and regulator, NBFIRA, are being kept informed of all developments,' she said.

The merged entity will be renamed with effect from the date of implementation of the proposed transaction to reflect its new identity. Both the Metropolitan and Momentum brand names will, however, continue to be used.

The two groups will operate separately and independently for the foreseeable future, with no changes to the way in which business is done in the short-term.

'There are, therefore, no anticipated effects to Metropolitan Botswana staff and policyholders and all stakeholders will be kept abreast of any changes and progress in the transaction as they unfold,' she added. 

With regard to the strategic benefits and opportunities of the merger, Metropolitan currently operates mainly in the low to middle-income retail markets while Momentum focuses primarily on the upper-income retail market.

In employee benefits, Momentum's umbrella retirement funds have a strong market presence while Metropolitan has well-established relationships with a large number of public sector and corporate clients and attained critical mass in the retirement fund administration arena.

Metropolitan is the leading player in the healthcare administration of closed schemes. Momentum has a product-oriented focus primarily aimed at the Momentum Health open scheme, supported by a strong broker distribution arm. The businesses also have different but complementary strategies in Africa.

Momentum entered Africa on the back of its health business distributed mainly to groups of employees. Metropolitan owns a number of life licences in Africa and is more retail-oriented. Between them, the two businesses have a footprint in 12 countries in Africa.

 FirstRand will unbundle its shareholding in the merged entity to FirstRand shareholders and no longer have a direct shareholding in Momentum. As a result of the unbundling, FirstRand shareholders will own around 60 percent and current Metropolitan shareholders around 40 percent of the entity. RMB Holdings, which is a large shareholder in FirstRand, has expressed its intention to own more than 25 percent of the merged entity.

An asset exchange ratio has been agreed based on the consistently calculated embedded values of Momentum and Metropolitan. Because Metropolitan is listed on the JSE, it will be used as the vehicle to facilitate the transaction.

Metropolitan has been operating in Botswana since 1997 and is 25 percent owned by the BDC while the rest is owned by the parent company, Metropolitan Pvt Ltd. FisrtRand is already in Botswana through FNBB.