JOHANNESBURG (Reuters) - South African insurer Momentum Metropolitan Holdings (MTMJ.J) is to acquire the short-term insurance business of financial services group Alexander Forbes (AFHJ.J) for around 1.94 billion rand ($139 million), the two companies said on Thursday.
Momentum Metropolitan, which recently changed its name from MMI Holdings, said the unit had identified short-term insurance as an area where it wanted to invest for growth, a view that had been strengthened by a strong performance in its existing short-term insurance business in recent years.
“This transaction accelerates and broadens the sustainable growth plans for this market segment,” it said in a stock exchange announcement, adding the Alexander Forbes’ unit had a strong management team and was a good cultural fit.
Shares in both Alexander Forbes and Momentum went into reverse following the news, however. Alexander Forbes’ shares were up 0.72% at 1328 GMT, when they had previously been higher, while Momentum’s were down 0.72%.
This was despite Alexander Forbes stating that it would return excess capital arising from the disposal, which is in line with company’s capital-light strategy and announced in March, to shareholders.
“The transaction consideration reflects the quality of the business and the value that Momentum Metropolitan places on the clients, employees and management team,” Chief Executive Dawie de Villiers said in a statement.
Momentum said the ultimate aim was to integrate the purchased unit into its current short-term insurance business, and for them to trade under one brand and with one license. The companies expect the transaction to close before the end of the year.
Reporting by Emma Rumney; Editing by Kirsten Donovan