JOHANNESBURG/LONDON (Reuters) - Investec (INLJ.J) cheered investors on Friday with plans to spin off its asset management unit in a surprise restructuring ahead of the departure after four decades of the South African firm’s founder and chief executive.
The plan to float the asset management business on the London Stock Exchange with a secondary listing in Johannesburg follows similar moves by Prudential (PRU.L), Old Mutual OML.L and Deutsche Bank (DBKGn.DE) as fees fall and costs rise.
Analysts had not expected any major changes a the Anglo-South African financial group, despite the upcoming departure of CEO Stephen Koseff and two other founding members.
Shares in Investec were up 10 percent at 0914 GMT on news of the strategy shift, which Hendrik du Toit, who heads the asset management business and will become its CEO after the demerger, said was needed for the unit to compete.
“If you want to play in the super league, independence wins,” he told reporters on a call, adding Investec’s management were confident the rest of the business could thrive alone.
Independence would give the asset management business, which contributed 24 percent of Investec’s pre-tax operating profit in 2017, greater flexibility to grow, UBS analyst Michael Werner said.
“In theory, there’s less bureaucracy to go through... you know 100 percent of that capital is allocated to you. It makes it a little easier, in terms of more rapidly deploying that capital or at least more rapidly making those decisions.”
Investec Asset Management has 109 billion pounds in client assets under custody, with offices in London, Cape Town, New York and Hong Kong.
While Investec gave no details on potential valuation, rival listed asset managers in Europe are priced from around 1 percent of assets under management to around 6.5 percent, depending on the asset mix and client type, which influences the fees earned.
Given Investec’s focus on active equity, bond and multi-asset funds, with some higher-margin alternatives, and a mixed retail and institutional client base, a 2 percent to 4 percent of total assets value would translate to $2.8 to $5.6 billion.
Du Toit said that as the business is independently run already there were few difficulties in spinning it out, and there would be talks about whether it would keep the brand.
Alongside Fani Titi, who is Investec chairman, du Toit will serve as joint CEO from Oct. 1 until the completion of the demerger, which is expected in 12 months.
Titi will then run what is left of the group, mainly specialist banking and wealth management, while maintaining a residual stake in the asset management business.
They will replace Koseff, who was instrumental in transforming Investec from a small leasing outfit in Johannesburg into a global investment bank and asset manager with a presence in South Africa, Australia and Britain.
Investec also said that it expected revenue in the six months to the end of September to be moderately ahead of the prior period, despite a technical recession in South Africa and uncertainty in Britain around Brexit.
Additional reporting by Simon Jessop and Lawrence White; Editing by Mark Potter/Keith Weir/Alexander Smith