New era for RMB Holdings as shareholders vote in favour of unbundling FirstRand

RMB Holdings [JSE:RMH] has been given the green light by shareholders to proceed with the unbundling of its entire stake in FirstRand Bank, marking the end of a 27-year history between the two companies.

RMH, whose major shareholders are investment holding company Remgro, Royal Bafokeng Holdings and the Public Investment Corporation, announced in November  ast year that it was looking to unbundle its 34.1{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} stake in the banking group. At a virtual AGM on Monday morning, 100{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} of RMH shareholders voted for the unbundling. The unbundling is set to take place on June 26. 

RMH will still remain listed on the JSE after the unbundling, leaving the company with its property portfolio as its sole remaining asset but no links to the financial services industry. The group unbundled its insurance interests in 2011 when Rand Merchant Investment Holding Limited listed as a separate entity.

Karl Gevers, head of research at Benguela Global Fund Managers, said it no longer made sense for shareholders to hold FirstRand through RMH. He said he had expected that all shareholders would support the unbundling.

“What will remain is the property business, and I would imagine management would have to decide if they want to pursue a property strategy and remain listed, or wind it down,” he said.

The group’s property business does not directly own any physical property. Its portfolio is made up of non-controlling stakes in four unlisted property businesses, including Atterbury Property Holdings and Atterbury Europe.

Atterbury Property Holdings, meanwhile, owns properties such as Deloitte’s new premises in Waterfall, Midrand, as well as Towers Main in the Johannesburg central business district.

RMH Property also has a stake in Divercity, an urban renewal property fund that is focused on affordable residential property, and an interest in Integer Properties 1 2 and 3. 

The total value of the all group’s property stakes – also known as their intrinsic value – was R672 million in December 2019, making up less than 1{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} of the group’s R111.4 billion market capitalisation at the time. But RMH said on Monday that this property portfolio has the potential to deliver good growth in the medium-to-long term.

Unfavourable Timing

RMH’s sole focus on property comes at a time when the local industry is facing unprecedented pressures, some of which stem from before the global lockdowns reduced tenants’ ability to pay rent.

RMH CEO, Brian Roberts, said on Monday that while the value of most SA real estate investment trusts had been “decimated” – with some trading at discounts of up to 85{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} on the value of their net assets – he believed there’s still a lot of value in the property sector.

RMH has the advantage of not being classified as a REIT and will remain listed under the banking sector on the JSE. However, it will not escape the crisis that the lockdown has created for landlords this year.

In all six of the countries where it has property exposure there have been lockdowns. But Roberts said in that in Europe, this impact has been lessened by the fact that its European portfolio is funded by less debt. Governments in all three countries where Atterbury Europe is present – Serbia, Cyprus and Romania – also ruled that tenants should pay a fixed portion of rent due, and that property companies are not required to repay any capital to banks until December 31.

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