FirstRand Limited today announced that following a joint agreement with Discovery, it intends to seek shareholder approval for the unbundling of the Group's 57% shareholding in Discovery. A detailed announcement outlining the full terms and conditions of the transaction will be published prior to the announcement of FirstRands results on 18 September 2007.
Commenting on the decision, Paul Harris, CEO of FirstRand said:
"Discovery was established by Adrian Gore and his team in 1992 and FirstRand fully supported his vision to create a new paradigm in South African healthcare. Since its creation Discovery has delivered R 8 billion of shareholder value to FirstRand.
Following the decision in 2000 to allow Discovery to enter the risk market, shareholders increasingly questioned the merits of FirstRand having two insurance businesses competing in the same markets. The Group's strategy was that "two horses in the race", was producing significant growth, as both companies were growing at the expense of the competition and therefore not destroying shareholder value. This strategy was monitored on a regular basis by the Boards of FirstRand, Discovery and Momentum.
With Discovery now entering the investment market and Momentum's growing presence in the health sector, both will increasingly be competing head on in all product areas and we have therefore agreed it is appropriate to fully un-bundle Discovery. This will liberate both companies, allowing them to pursue their respective strategies and we are confident that they will go from strength to strength."
CEO of Discovery, Adrian Gore, added:
"The unbundling of FirstRand's shareholding in Discovery is a point of inflection for Discovery, in that it removes any strategic conflict going forward and opens up many opportunities for the group.
From Discovery's perspective, whilst we have appreciated the considerable value added by FirstRand we have had to be sensitive to the market-place competition between Discovery and other FirstRand companies. The unbundling removes any strategic constraints and provides Discovery with flexibility and increased scope for business opportunities.
It is also important to point out that RMBH was the original shareholder of Discovery and in effect from a philosophical point of view Discovery is now returning to the shareholder structure it had when it was formed in 1992.
In addition, the unbundling addresses the long-standing issue of Discovery's small free-float and limited liquidity of shares."
The current cross-directorships between FirstRand and Discovery will be reviewed and the appropriate changes communicated to shareholders in the detailed announcement to follow.