Old Mutual makes a foray into stockbroking

By James Anyanzwa

The South Africa-based Old Mutual Holdings Ltd has sealed plans to merge with a local stockbrokerage, Reliable Securities Ltd (RSL), in a move that seeks to create growth synergies between the two investment firms.

Industry insiders said the deal was completed last week (June 30), to enable the firms comply with the Capital Markets Authority (CMA)’s new capitalisation, and shareholding requirements.

Details on the share purchase agreement, however, remained scanty, after it emerged that the transaction was still awaiting CMA approval.

Composition ironed-out

"The two firms will merge and have agreed on the composition of the new management," a highly placed source that declined to be named told The Standard Business yesterday.

It has also emerged that modalities of re-branding the new business entity, including a change of name, would be discussed and agreed upon after the transaction receives CMA approval.

"Obviously the business will be re-branded," said source.

Mr Jos Konzolo, the Reliable Securities chief executive, could not be reached for comment.

The 15-year-old firm is expected to benefit from a boost in managerial expertise, additional capital, and increased business accruing from Old Mutual’s expanded base of institutional investors

On the other hand Old Mutual, one of the largest asset managers in the world, hopes to find a platform to engage directly in stockbroking business.

The firm also expects to find a stage to market its collective investment schemes (unit trusts) to a huge pool of retail investors.

"The potential is enormous. This merger will create value for the shareholders, directors and clients," said source.

"All the staff at the brokerage firm will be retained, and there will be no lay offs," the source added.

The development comes after ABC and Cooperative banks acquired 86 per cent and 60 per cent controlling stakes in Crossfield and Bob Mathews stockbrokerage firms, respectively.

The two institutions have since been renamed ABC Capital and Kingdom Securities respectively.

The NIC Bank bought 55 per cent stake in Solid Investment Securities, and renamed it NIC Capital.

Although the financial bruises sustained by financial intermediaries during the Safaricom Initial Public Offering (IPO) two years ago paralysed operations of many stockbrokers and investment banks, the tragedy was a blessing in disguise for stock agents and banks seeking opportunities to enter the equity market.

stringent regulations

Moreover, junk firm scavengers looking to reap from the stockbroking trade got a much needed impetus, after the State announced stringent regulations requiring brokerage firms and investment banks to recapitalise, and limit their share ownership by individuals to not more than 25 per cent.

Stockbrokers and investment banks are expected to re-capitalise to the tune of Sh50 million and Sh250 million, up from the current Sh5 million and Sh30 million respectively.

But attempts by brokers and investment banks to comply with these rules have mostly ended up in buyouts and transfer of ownership to strategic investors.