FirstRand Limited · JSE:FSR
FirstRand — Merger or Acquisition (May 2005)
12 slides from FirstRand's merger presentation, May 20, 2005
Slide 1: Offer to acquire Sage Group
20 May 2005 Hillie Meyer Offer to acquire Sage Group
Slide 2: Format of the presentation
Format of the presentation 1. Background 2. Overview of the transaction 3. Rationale for the transaction 4. Next steps
Slide 3: Background
Background • Consolidation of the life industry • Increased focus on value for money • Cost efficiencies critical • Load acquisition opportunities
Slide 4: Background: Sage's position
Background Sage’s position: • Medium sized player • Life company fundamentally sound • Strong agency corps • EV calculation basis • Tax issues • Debt overhang from US venture
Slide 5: Overview of the transaction: Sage's process
Overview of the transaction Sage’s process • Recapitalisation & management restructure • Refinanced the ELN • Multi-bidder tender process late 2004 • Shortlist of 3 bidders • Exclusivity granted to Momentum • Momentum offer accepted by board & major shareholders
Slide 6: Overview of the transaction
Overview of the transaction • Thorough due diligence • Offer for Sage Group - R634m cash offer (175 cps), of which - R120m held in escrow (33 cps) • Funded from internal resources
Slide 7: Overview of the transaction
Overview of the transaction Published % Offer Life EV 1568 * 90% = 1411 Group debt (777) * 100% = (777) Group EV 791 * 80% = 634
Slide 8: Rationale
Rationale Main attractions • Fast-track agency growth • Efficiency improvements • Unlock value from in-force Additional synergies • Increased assets under management • Improved new business profitability • Employee benefits synergies • Capital efficiencies
Slide 9: Fast track agency growth
Fast track agency growth Momentum Sage Number of agents 290 550 Equivalent APE* R112m R99m Share of agency market 2,8% 2,5% EV of New Business R37m R20m *12 months ended 31 December 2004
Slide 10: Fast track agency growth
Fast track agency growth • General agency agreement • Access to Momentum products • Grow to 1000 agents • Autonomous profit centre
Slide 11: Efficiency improvements
Efficiency improvements % Growth Number of policies 25% Premium income 12% Administration expenses 5% Average cost/policy (10%)
Slide 12: Next steps
Next steps • Regulatory approval - FSB - Competition authorities • Shareholder scheme approval • General agency agreement • Monitoring committee • 100 day implementation