Legae Buys Peregrine Securities to Add Prime Broking Edge

JOHANNESBURG (Capital Markets in Africa) – Legae Securities Pty Ltd., South Africa’s first black-owned and managed securities firm, agreed to buy the stockbroking unit of Peregrine Holdings Ltd., giving it access to one of the country’s largest prime-broking businesses.

A consortium of investors including Johannesburg-based Legae, some management from Peregrine Securities and a group of black investors, agreed to pay 760 million rand ($57 million) for Peregrine’s 65 percent stake in the brokerage, the companies said in a statement Wednesday. It will also buy Peregrine’s international-securities business for the equivalent of 150 million rand.

The deal gives Legae a foothold in the hedge-fund industry, where Peregrine oversees more than 27 billion rand of assets on its prime-broking platform, while also bolstering the company’s research, equities and derivatives operations. Black-owned stockbrokers are still struggling to boost their participation in Africa’s most industrialized economy 24 years after the end of white-minority rule, having to compete against some of the country’s largest lenders as well as foreign investment banks.

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“There have been many black entrants to the South African financial-services market, but as a collective, the group’s annual share of Johannesburg Stock Exchange value-traded was less than five percent in 2017,” Fatima Vawda, the chairwoman of Legae Securities, said in the statement. “This transaction was inspired by the collective aspiration of the industry for the emergence of a globally-competitive, innovative, black-owned, managed and controlled financial services firm.”

Peregrine Securities was the top ranked firm in terms of value traded in the equity derivatives market and No. 2 among all brokers registered with the JSE in terms of value and volume in equity trading, the company said in November. The consortium is paying cash, with the offer translating into a price-to-earnings ratio of nine times the group’s share of the business, Peregrine said.

Peregrine shares rose as much as 7.6 percent, before paring gains to trade 4.8 percent higher at 20.95 rand as of 12:22 p.m. in Johannesburg. The company on Wednesday also released earnings for the year through March, which showed a 3 percent increase in net income to 504 million rand.

Source: Bloomberg Business News