Marsh & McLennan to Buy 34% of Alex Forbes of South Africa

Jun 23, 2014 11:23 am ET

(Updates with closing share price in second paragraph.)

June 23 (Bloomberg) -- Marsh & McLennan Cos will buy a 34 percent stake in Alexander Forbes Ltd. as Africa’s largest independent pension-fund manager prepares to sell shares on the Johannesburg Stock Exchange next month.

Mercer Africa Ltd., a subsidiary of New York-based Marsh & McLennan, the biggest insurance broker by market value, will buy 14.9 percent of Alex Forbes at the time of the initial public offering and a further 19.1 percent after regulatory approvals, the Johannesburg-based company said today in an e-mailed statement. The preference shares declined 7.4 percent to 8.80 rand in Johannesburg, potentially valuing Mercer’s stake at about 3.87 billion rand ($366 million).

“This is the beginning of a strong partnership that will generate value for both of our firms and our respective clients,” Mercer Chief Executive Officer Julio A. Portalatin said in an e-mailed statement. “We are particularly excited to significantly broaden our exposure to the growth prospects present in South Africa and sub-Saharan Africa.”

Alex Forbes was delisted and bought out by companies including Actis LLP and Ethos Private Equity Ltd. for 8.2 billion rand in 2007. Deutsche Bank AG and Rand Merchant Bank were hired last year as financial advisers. Shareholders met on June 20 to decide whether to sell shares on the bourse or consider offers from potential trade buyers. Bank of America advised Mercer.

Africa Gateway

International financial companies are seeking ways to increase their presence in Africa to take advantage of rising household incomes and economic growth. While South Africa’s gross domestic product shrunk in the first quarter as a record- long mining strike hurt production, the country is used by many companies as a gateway to faster-growing sub-Saharan Africa.

The IPO will take place on July 24, Alex Forbes CEO Edward Kieswetter told reporters at a press conference at the company’s Johannesburg headquarters today. Executives will be able to take part in the share sale and while the private-equity owners will all exit they may decide to reinvest. The share sale isn’t intended to raise “significant capital” for the company, the CEO said.

The IPO and Mercer investment “balances the best interests of the organization and the outgoing shareholders while creating opportunities for new shareholders,” Kieswetter said. “It’s a vote of confidence in South Africa as an investment destination.”

Kieswetter, who became head of Alex Forbes in 2010, has overseen the sale of three U.K. operations and South African insurance unit Guardrisk while returning the company to profitability.

--With assistance from Matthew Campbell in London.