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Rand Merchant Investment (RMI) said on Monday that it intends to unbundle its major investments in Discovery and Momentum Metropolitan and distribute them to its shareholders. MI now holds a 25% stake in Discovery and a 27% stake in Momentum Metropolitan, making it the largest shareholder in both firms. After the unbundling, RMI’s stockholders will have direct ownership in these new firms.
As the discount between RMI’s current trading price and its underlying intrinsic value shrinks, the RMI board anticipates that this step will unlock “substantial shareholder value”. MI’s shares opened Monday’s trading at R35.26, up 14% from the previous day. OUTsurance, Youi, and Hastings will have “exposure to and influence over” unlisted insurers in South Africa, Australia, and the United Kingdom as a result of the unbundling. RMI holds an 89 percent stake in OUTsurance.
In addition to RMI’s main owners Remgro and Royal Bafokeng, and the founders of the RMB group (Laurie Dippenaar, Paul Harris, GT Ferreira and Pat Goss), RMI believes it has secured support in principle from investors who hold 65 percent of the firm. The unbundling should be finished by the end of 2022.
Since the early 1990s, the Rand Merchant group of firms has had investments in both companies. When the group acquired Momentum Metropolitan in 1992, it also gave Adrian Gore and Barry Swartzberg the money they needed to start Discovery in 1993, as well as a life insurance licence. To “optimize RMI’s capital structure,” the business intends to issue shares worth R6.5 billion as well.