NEWS & MEDIA

ARC investment in CMB International

17 August 2016

Key Messages

  • African Rainbow Capital (ARC), a black owned and controlled investment company which forms part of the Patrice Motsepe stable, has invested in a 29,9% share of CMB International LTD (CMB International), the listed holding company of independent investment banking and advisory firm Bravura.
  • CMB International is listedontheStockExchangeofMauritiusand also holds a secondary listingontheNamibianStockExchange.
  • CMB International and its subsidiaries provide corporate finance, structured solutions and property investment services to clients in Southern Africa and Australia.
  • Having ARC as a strategic shareholder and the capital injection received through the ARC investment will accelerate and underpin CMB International’s growth strategy – which is to diversify its business, and grow exponentially through acquisitions.
  • It further provides excellent opportunities for Bravura as a leading independent investment banking and advisory firm.

CMB International/Bravura

  • This transaction marks a seminal moment in the evolution of CMB International and Bravura. It is a real coup for the group to be recognised for both our skills base and our growth potential.
  • When CMB International bought Bravura in December 2015, it recognised the opportunity to capitalise on the know-how and contacts of the employees of the Bravura group to identify further investment opportunities and to facilitate the capital raising to finance its investments.
  • The ARC team members bring a wealth of experience in the financial services industry and empowerment world to the table, which they can leverage to create strong returns for shareholders.
  • CMB International, the listed holding company of Bravura, intends to grow its portfolio of assets, mainly through strategic investments into high quality financial services businesses.
  • The ARC investment provides a strong transaction pipeline and access to capital to grow the business through acquisitions as we further diversify into non-bank financial services, for example alternative investment management, and trading and brokerage services. This growth will be complementary to our core corporate finance, structured solutions and property investment and advisory services.
  • Bravura will not only provide corporate finance and structured solutions services as required across the group’s investments, but can also become the platform for the smaller financial services investments that ARC plans to make.

ARC

  • The investment is born out of the trust we have built over the long relationships we have had with the leadership of Bravura.
  • Our investment in Bravura, through CMB International, supports our commitment to enable equity-based transformation in the property and financial services industries in Africa and South Africa, benefiting the economy as a whole.
  • This investment forms part of our strategy to focus our initial portfolio on both financial services and compelling private equity placements to become a fully integrated diversified financial services business.
  • The capital we provide will enable Bravura to grow both organically and acquisitively to deliver exceptional returns on equity.
  • We foresee that many synergies will be unlocked between ARC’s various investments and CMB/ Bravura. Bravura will not only provide corporate finance and structured solutions services as required across the group’s investments, but can also become the platform for the smaller financial services investments that ARC plans to make.
  • The human capital entrenched in CMB International represents some of the best minds in the market. We believe this will serve ARC and our investments well as we build our portfolio to create wealth for stakeholders and continue to benefit the community.
  • We look forward to the ongoing success of this exceptional business.


1. 
Are there concerns about the Hudaco claim against Bravura?

ARC: We have performed our due diligence investigation and are comfortable to let that matter run its course.

CMB International: We performed satisfactory due diligence. Bravura’s network and the opportunity to acquire additional strong financial services has been a strong consideration and benefit.

Bravura: Bravura disputes the validity of the claims against it by Hudaco and is defending them. The matter remains ongoing and Bravura is not in a position to comment further on the merits of the matter until such time as the issues have been ventilated in court and judgement has been delivered.

2. The Hudaco allegations must have had a massive impact on Bravura’s reputation, and yet ARC has invested. What are your comments on this?

We have had immense support from our clients since the Hudaco matter. This investment from ARC clearly recognises Bravura’s potential as a growing business with a reputation for excellence, immense intellectual capital and the delivery of bespoke solutions for clients. We are about to celebrate 17 successful years in the business and we have enormous potential for further growth. We are proud that ARC has recognised this and we look forward to further success.

3. What are the other businesses that were bought by CMB International?

  • Extell Capital
  • Calante
  • Bravura (South Africa)
  • Bravura (Namibia)
  • Mutiplex
  • Concise

Aren’t these all Bravura businesses?

No, there are various shareholders.

4. What will ARC’s total investment be?

The value is R120 million (R60million of equity and R60million preference share facility)

5.What is the current value of CMB International?

It is approximately R400 million.


6. Discounted rate / valuation / how was the investment value calculated?

The business was valued using a discounted cash flow methodology as well as a reasonability price earnings multiple check. A healthy discount was then awarded to ARC due to their BEE credentials and significant networks.

7. Has this deal been planned for some time?

  • When our discussions with ARC commenced, the acquisition of the Bravura group was already far down the line with CMB. We were happy to be bought by CMB International to become part of the bigger group. ARC was introduced to CMB as we thought they would be a very good strategic investor for the wider group.

8. What was the reasoning behind Bravura’s sale to CMB International - an entity listed on the Stock Exchange of Mauritius and then listed on the Namibian Stock Exchange last year? What does the inward listing facilitate?

  • We were keen to become part of a larger financial services business because we thought that this would facilitate exponential growth for our shareholders.
  • The inward listing allows the South African and Namibian shareholders to hold their shares on the NSX, without triggering a “loop” for exchange control purposes.

9. Why the NSX and not the JSE?

  • This listing was undertaken before Bravura was acquired. CMB International already has a significant business and presence in Namibia and this exchange is far more cost effective than the JSE.

10. Is Bravura owned 100% by CMB International?

  • Yes.

11. What was Bravura valued at? / What did CMB International pay for Bravura?

Bravura was sold for a total consideration of R116 million. It was an acquisition for shares – the shareholders of Bravura received shares in CMB International. The resulting shareholding of the Bravura shareholders after the ARC transaction is 25% of CMB International.

12. Why did CMB International acquire Bravura?

CMB International intends to grow its portfolio of assets, mainly through strategic investments into high quality financial services businesses such as Bravura.

The acquisition of Bravura further provides an opportunity to capitalise on the know-how and network of the Bravura group, thereby enabling CMB to identify further investment opportunities and to facilitate the capital raising to finance its investments.

13. Who are the shareholders of CMB International?

Titan Group continues to hold 14%. Capital Markets Brokers owns 44%. ARC will own just under 30%. The shareholding of Bravura’s other original shareholders (excluding Titan Group) will be 11% after the ARC transaction. There are some other smaller shareholders.

14. Who were the shareholders of Bravura at the time of the Hudaco transaction?

Titan Group, management and staff.

15. How are they now involved in the business?

All of them are now shareholders of the listed group.

16. How was the Hudaco case addressed when Bravura was sold to CMB International?

CMB was satisfied with its exposure post the completion of an extensive due diligence.

17. So the investment is effectively flowing offshore and being held offshore? Is ARC not focused on South African businesses?

ARC is investing in financial services in South Africa and Africa. The ARC investment will be used to acquire businesses in Southern Africa.

18. Are shares in CMB International available to the public?

Yes, although there is currently limited liquidity, we believe that with the growth of the combined group there will be increased liquidity into the future.

19. What is the way forward?

The platform for CMB International’s continued growth with ARC as a shareholder of reference and the access to capital for the planned acquisitions and diversification is significant.

CMB International, the listed holding company of Bravura, intends to grow its portfolio of assets, mainly through strategic investments into high quality financial services businesses.

The ARC investment provides a strong transaction pipeline and access to capital to grow the business through acquisitions as we further diversify into non-bank financial services, for example alternative investment management, and trading and brokerage services. This growth will be complementary to our core corporate finance, structured solutions and property investment and advisory services.