Like Investec PLC, Ninety One will be listed on the Johannesburg and London stock exchanges. Ninety One PLC will be the UK-based entity and Ninety One Limited the South African one.
Existing Investec shareholders will receive one Ninety One PLC share for every two Investec PLC shares currently held, and will receive any dividends declared by both companies relating to the financial year ending 31 March 2021.
Following the demerger, the business of Investec PLC will comprise the Investec Specialist Banking and Wealth & Investment businesses.
Not "better together"
The board of Investec believes reducing the size of the existing business by hiving off the asset management operations will bring numerous benefits, including a more disciplined approach to capital allocation, the chance to deliver a “more holistic, client-centric offering in Specialist Banking”, improved cost management and the opportunity to build on the “compelling existing linkages” in Investec Bank and Wealth between business units and across geographies.
As for Ninety One, the benefits of being cast off to fend for itself include strategic and financial flexibility and the chance to attract and retain top-level staff, while management believes going independent will also raise the asset management business’s profile.
Alongside the slightly nebulous claims being made above, Investec said the Investec Bank and Wealth management team has committed to deliver improved returns on equity with an Investec Bank and Wealth target of 12% to 16% to be achieved by the financial year ending 31 March 2022 (compared to 10.7% achieved by Investec Bank and Wealth for the six months ended 30 September 2019).
Detailed financial targets have been made for each of the remaining underlying businesses, while Ninety One will “remain focused on delivering profitable growth over the long term”.
Investec said the demerger should not affect the ability of either business to continue churning out dividends in line with the combined group’s existing dividend policy.
Ninety One will be targeting a dividend pay-out ratio of at least 50% of post-tax operating earnings; Investec Bank and Wealth is targeting a dividend pay-out ratio of 30% to 50% of the consolidated Investec Group's adjusted earnings per share in pounds sterling.
Who will end up owning what? (It's complicated)
Following the demerger, it is expected that about 55.9% of the total issued share capital of Ninety One PLC (the UK bit), will be held by Investec ordinary shareholders.
Around 53.1% of Ninety One Ltd (the South African bit) will be held by Investec shareholders.
Just to make the arithmetic a bit more difficult in terms of calculating who will end up owning how much of what, Investec expects to carry out a placing of shares that will see new investors come on board and some existing shareholders increase their stakes. The newly issued shares will represent about 8.3% of the total issued share capital of Ninety One PLC and some 13.5% of the share capital of Ninety One Limited.
The net proceeds of the Ninety One share sale will be retained by Investec PLC and Investec Limited (i.e. the entities that are not being hived off).
The above proposals require the approval of shareholders and also the courts. Assuming the proposals are approved, Investec expects the big split to happen on the slightly inauspicious date of Friday the 13th in March.
Top brass keen for shareholders to support the proposals
"We continue to make good progress with respect to the proposed demerger and listing of Ninety One,” said Fani Titi and Hendrik du Toit, the joint chief executive officer of Investec.
“We remain excited about the benefits of this transaction and are determined to drive simplification across the group, focusing on enhancing the long-term prospects of Ninety One and Investec Bank and Wealth for the benefit of all our stakeholders. Our shareholders are set to benefit from the resulting value creation through their direct ownership of two distinct businesses, well-positioned for long-term growth,” they maintained.
Shares in Investec were down 1.6% at 440.8p in early deals.