Alexander Forbes Weighs Deals Involving 22 African Targets

JOHANNESBURG (Capital Markets in Africa) – Alexander Forbes Group Holdings Limited, a South African provider of retirement, investment and insurance services, said it is sifting through 22 potential targets for deals on the continent as part of an expansion drive to accelerate profit growth.

The deals range from small acquisitions and partnerships to “meaningful game changers,” mainly in South Africa, Nigeria, Ghana, Kenya and Morocco, Chief Executive Officer Andrew Darfoor said in an interview at Bloomberg’s Johannesburg offices on Wednesday. Any purchase would be funded by cash or proceeds from the sale of its stake in the U.K.’s Lane Clark & Peacock LLP and African Rainbow Capital Ltd.’s investment in Alexander Forbes.

Having been in the job for just more than a year, Darfoor has considered 40 potential deals and executed one, which was the purchase of a small employee benefits business in Zimbabwe. By 2022, he wants Alexander Forbes to increase its customer base to 2.5 million people from 1.4 million now and directly offer those clients access to financial products throughout their working lives and into retirement.

Given Alexander Forbes’ excess cash reserves, and the detrimental effect they’re having on the company’s return on equity, the business has bought back 2.5 percent of its shares since June and is committed to giving money back to shareholders if it can’t find a use for the funds in the next 12 months, Darfoor said. The company, which paid a special dividend in July, can buy back as much as 5 percent of its stock.

The company is also seeking to increase the share it makes from its public-sector business to 10 percent of revenue by 2022 from about 6 percent now, the CEO said. Alexander Forbes’ relationship with African Rainbow Capital “opens the door” to offer pension fund, insurance and healthcare products to government workers and labor unions, Darfoor said.

Alexander Forbes has dropped 12 percent this year and 6.7 percent since it listed on the Johannesburg Stock Exchange in July 2014. By comparison the JSE’s all share index has climbed 14 percent this year and the 62-member FTSE/JSE Africa Financials Index has risen 3 percent.

Source: Bloomberg Business News