African Rainbow Capital Ltd., a South African financial-services firm started by Patrice Motsepe, the richest black South African, plans to raise more than 3 billion rand ($234 million) in an initial public offering of its investment-holding unit, according to people familiar with the matter.
According to Bloomberg report, ARC, as it’s known, will fold its non-financial services assets into the company and list the unit’s stock on the Johannesburg Stock Exchange, the people said, asking not to be named because the plans are private. The share sale, scheduled to take place by the end of September, may even raise as much as 5 billion rand, they said.
The JSE placement may be followed by a secondary listing on A2X Markets (Pty) Ltd., a new exchange part owned by ARC and due to start operating later this year in Johannesburg, two of the people said. ARC also plans to increase its stake in A2X to 25 percent from 20 percent, they said. African Rainbow co-Chief Executive Officer Johan van Zyl declined to comment.
Motsepe, 55, started ARC in April last year with access to as much as 17 billion rand in capital and a view to build interests spanning everything from life insurance and healthcare services and administration to money management and banking. Motsepe, with a net worth of $1.8 billion according to the Bloomberg Billionaires Index, is pushing efforts to spread the country’s wealth more equally between the black majority and the white minority, who still own most of the economy 23 years after the end of apartheid.
Economic Headwinds
The IPO comes as South Africa’s economy is in a recession and political uncertainty heightened after President Jacob Zuma at the end of March fired his finance minister in a midnight cabinet purge.
Motsepe, a brother-in-law of Deputy President Cyril Ramaphosa, earned his fortune by buying and improving output from marginal gold mines operated by AngloGold Ashanti Ltd. He expanded his company, African Rainbow Minerals Ltd., into platinum, copper, coal and iron ore and started Ubuntu-Botho Investments Ltd., ARC’s parent, in 2004. Ubuntu-Botho owns about 12 percent of Sanlam Ltd., Africa’s second-largest insurer.
ARC aims to complete the IPO by the third quarter of this year and the investment-holding company will have an array of non-financial services businesses, such as its stake in EOH Holdings Ltd., which has interests in technology services, and Afrimat Ltd., a supplier of building materials, co-CEO Johan van der Merwe said in an interview with Johannesburg-based news service Moneyweb in March.
ARC will have a substantial stake in the investment-holding company and invest its own money into the unit, Van der Merwe told Moneyweb. It also plans to raise outside funds for ARC, he said.
Bidvest Group Ltd. founder Brian Joffe raised 2 billion rand for the April listing of investment company Long4Life Ltd. on the JSE, while EPE Capital Partners Ltd. racked up a similar amount last year to help fund its private-equity arm.
Courtesy Bloomberg
