PSG Weighs Spinoff of Best-Performing S. African Bank Stock

JOHANNESBURG (Capital Markets in Africa) — PSG Group Ltd. is weighing a spinoff of Capitec Bank Holdings Ltd., the best-performing South African banking stock since its listing in 2002, to unlock more value from its investments.

All or part of PSG’s 30.7% stake in Capitec might be distributed to its investors, the company said in a statement on Wednesday.

“The unbundling should be positive for PSG and result in a further decrease in the discount to net asset value,” David Talpert, a specialty finance analyst at Avior Capital Markets, said in an email. “PSG will still want to have some exposure to Capitec, therefore we expect a shareholding post the unbundling of 15% to 20%.”

New legislation may also result in PSG being classified as a financial conglomerate, which would increase its regulatory burden. A spinoff would echo similar moves by other investment-holding companies seeking to narrow the discount at which their shares trade at relative to the value of their underlying holdings. It also comes amid market turmoil because of measures put in place to contain the coronavirus.

RMB Holdings Ltd. is unbundling its 34% stake in FirstRand Ltd., the nation’s largest lender by market value. Insurer Old Mutual Ltd. distributed its 52% holding in Nedbank Group Ltd. in 2018. Investec Group spun off its money-management unit earlier this year, echoing moves by Prudential Plc and Deutsche Bank AG.

While the transaction won’t change anything operationally for Capitec, “the market usually takes increased stock availability through share unbundling transactions negatively,” said Harry Botha, Avior’s banking analyst.

Shares in Capitec fell as much as 8.1% before paring losses to 4.1% as of 9:11 a.m. The stock is down 10% since PSG on April 23 said it was considering a corporate transaction without giving any details. PSG jumped as much as 7.2% and was last trading 4.4% higher.

Capitec, which started as an unsecured lender and then expanded into a full-service offering, has been one of the country’s fastest-growing banks and now has about 14 million customers. It’s the third-largest South African lender by market value and recently bought Mercantile Bank to expand into business banking.

Source: Bloomberg Business News