Investec expects 189 million pounds from asset management spin-off in March

JOHANNESBURG/LONDON (Reuters) - Anglo-South African financial services group Investec INVP.LINLJ.J expects to raise about 189 million pounds ($242 million) from the sale of around 10% of its asset management business, which will be renamed Ninety One when it is spun off in March.

Investec, which manages more than 119 billion pounds ($154 billion) in assets, announced plans for the split last year and said the asset manager would be better able to focus on creating long term value away from Investec’s banking and wealth operations.

The demerger follows similar moves by Prudential PRU.L, Old Mutual OML.L and Deutsche Bank DBKGn.DE as fees fall and costs rise in the fund management sector.

Joint Chief Executive Fani Titi said the move was in the interests of shareholders and clients.

“Shareholders will benefit from direct ownership of two attractive, independent businesses with management teams focused on long-term growth and value creation,” he said.

Investec shareholders will receive one Ninety One share for every two Investec shares, both for its Johannesburg and London-listed stock.

In a circular to shareholders on Friday, Investec said the expected proceeds are based on its valuation of the Ninety One businesses at 1.89 billion pounds as of October 25 this year.

The actual proceeds of the Ninety One share sale will only be determined at the time of the split, which is scheduled for March 13 and requires shareholder approval. The business will have a dual-listing in London and Johannesburg.

“Clearly there are some headwinds in this sector in terms of the move from active to passive management,” said a source familiar with the Ninety One demerger situation. “This move enables the asset management business to pursue an independent path and navigate those headwinds very well.”

Co-chief executive Hendrik du Toit will assume the role of chief executive of Ninety One, while Kim McFarland will be finance director.

Gareth Penny will be Ninety One's chairman. For the last 12 years he has been a non-executive director of Switzerland's Julius Bar Group BAER.S. He is also chairman of nickel and palladium producer Norilsk Nickel and was previously CEO of Anglo American AAL.L unit De Beers.

Following the transaction, Investec expects about 55% of Ninety One to be held by existing shareholders, with 15% being retained by Investec and 20% being held by Forty Two Point, the investment vehicle through which the management and directors participate in the business.

The lender is expected to incur transaction costs of at least 56 million pounds which will be covered by the proceeds of the share sale, in addition to any tax liabilities arising from the transaction. The remainder will be used to strengthen Investec’s capital position and support its growth plans, the company said.

London-listed shares in Investec were down 2% at 438.9 pence by the Friday’s close, recovering from the day’s low of 423.9 pence.

Its Johannesburg-listed shares were down 1.8%.

JP Morgan and Fenchurch Advisory are acting as financial advisers.

Reporting by Emma Rumney in Johannesburg, Abhinav Ramnarayan and Clara Denina in London; Editing by Rachel Armstrong and Elaine Hardcastle