June 21, 2018 / 10:23 AM / a month ago

UPDATE 2-South Africa's Imperial to hive off auto dealership arm

* Deal to gives investors direct exposure to auto unit

* Auto dealership unit has around $5 bln in annual sales

* Listing of unit expected in November (Adds analyst, CEO comments, management changes)

By Tiisetso Motsoeneng

JOHANNESBURG, June 21 (Reuters) - South African transport group Imperial Holdings will spin off its auto dealership business, it said on Thursday, the latest move in a strategic shake-up that will a create a separately listed entity with around $5 billion in annual sales.

The break-up of Imperial, which traces its roots back to a single car showroom in Johannesburg in the 1940s, is part of a strategic overhaul implemented over the last three years that has included the sale of more than 40 non-core businesses and around 50 properties.

The spin-off would give shareholders a choice of direct exposure to both Imperial’s logistics unit, which counts businesses as clients, and its primarily consumer-facing automotive arm Motus.

“The board believes that the separation of the two divisions will enable the component parts of Imperial’s businesses to operate in a more focused and efficient manner,” Imperial said in statement.

Imperial’s logistics unit, whose trucks haul everything from fuel and beer to cement and vehicles in Europe and Africa, brings in more than 40 percent of the group’s 120 billion rand ($8.83 billion) annual revenue.

The auto unit, which operates more than 350 dealerships and is South Africa’s exclusive importer of Hyundai, Kia and Renault vehicles, has around nearly 70 billion rand in annual sales.

“It makes sense to separate their more stable logistics business from the cyclical car dealership business, but I’m not sure the benefits would be immediate,” said Wayne McCurrie, a fund manager at Ashburton Investments.

Shares in Imperial were down 0.7 percent at 198.31 rand as of 1329 GMT, broadly in line with the blue-chip JSE Top-40 index .

Chief executive Osman Arbee said banks Standard Bank and JP Morgan are working on the equity valuations of the two businesses, and that he expects the break-up to be complete by November this year.

Arbee, a 14-year veteran of the company, also told a conference call that the deal had broad support from the company’s shareholders, which include Lazard Asset Management and Public Investment Corporation.

“We’ve got very good support for the strategy. There was no one that came outright and said ‘no, we don’t like the idea’,” he said.

Arbee is set to relinquish his role as Imperial chief executive to take the helm of the soon-to-be-hived-off Motus.

Marius Swanepoel will become chief executive of Imperial, which will be renamed Imperial Logistics before he retires in June next year.

Swanepoel will be replaced by the group’s current finance head Mohammed Akoojee. ($1 = 13.6000 rand) (Reporting by Tiisetso Motsoeneng; Editing by Mark Potter, David Evans and Jan Harvey)

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