S.Africa's Rand Merchant to unbundle stake in insurers, plans rights issue

The logos of companies Rand Merchant Bank, FNB, Wesbank and Ashburton Investments are seen outside the FirstRand offices in Cape Town, South Africa, March 11, 2019. REUTERS/Mike Hutchings

JOHANNESBURG, Sept 20 (Reuters) - South African financial services holding company Rand Merchant Investment (RMIJ.J) said on Monday it would unbundle its stake in two major local insurers and carry out a rights issue to narrow a discount between its share price and its book value.

Rand Merchant Investment along with several other big South African companies own stakes in other publicly listed firms, which often leads to their shares trading at a discount to book value.

RMI's restructuring will help among other things to "unlock material shareholder value through a reduction in the discount at which RMI currently trades to its underlying intrinsic value," the company said in a statement.

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As part of the restructuring, RMI will unbundle all of its stakes in two major life insurers Discovery Ltd (DSYJ.J) and Momentum Metropolitan Holdings (MTMJ.J) and distribute them to RMI shareholders.

The overhaul of the company's structure would also involve a 6.5 billion rand ($438.26 million) rights issue which will help it to "optimise RMI's capital structure," it said.

Since the company's shareholding in Discovery and Momentum served as a collateral for its debt, the proceeds from the rights issue will be used to reduce RMI's gross debt from 11.8 billion rand to a level "more commensurate with the asset base and anticipated dividend flow of the remaining assets," it said.

It did not specify what would be its final debt level after the rights issue.

(This story corrects headline to say 'unbundle' instead of 'sell')

($1 = 14.8314 rand)

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Reporting by Promit Mukherjee. Editing by Jane Merriman

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