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STANDARD BANK GROUP LIMITED - Exercise Of The Put Option Granted To The Group By ICBC Over The Groups Residual 20% Shareholding In ICBCA

Release Date: 08/08/2019 07:40
Code(s): SBK     PDF:  
 
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Exercise Of The Put Option Granted To The Group By ICBC Over The Group’s Residual 20% Shareholding In ICBCA

Standard Bank Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1969/017128/06)
JSE and A2X share code: SBK
NSX share code: SNB
ISIN: ZAE000109815
(“Standard Bank Group” or “the group”)

ANNOUNCEMENT REGARDING THE EXERCISE OF THE PUT OPTION GRANTED TO THE
GROUP BY INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED OVER THE GROUP’S
RESIDUAL 20% SHAREHOLDING IN INDUSTRIAL AND COMMERCIAL BANK OF CHINA
(ARGENTINA) S.A. AND ITS AFFILIATES (“THE PROPOSED TRANSACTION”)

1. Background and salient terms

  In November 2012, the group completed the disposal of a controlling
  interest in each of Industrial and Commercial Bank of China
  (Argentina) S.A. (previously Standard Bank Argentina S.A.), ICBC
  Investments Argentina S.A. Sociedad Gerente de Fondos Comunes de
  Inversión (previously Standard Investments S.A. Sociedad Gerente de
  Fondos Comunes de Inversión) and Inversora Diagonal S.A. (collectively
  “ICBCA”) to the Industrial and Commercial Bank of China Limited
  (“ICBC”). The group retained a 20% shareholding in ICBCA, held by
  Standard Bank Group’s wholly owned subsidiary, Standard Bank London
  Holdings Limited.

  In the ICBCA shareholders’ agreement, ICBC granted a put option to
  the group under which the group was given the right to sell all of
  its remaining shareholding in ICBCA to ICBC, by giving notice at any
  time between 1 December 2014 and 30 November 2019. The strike price
  of the put option is fixed at USD180.751 million (approximately
  R2.7 billion based on the exchange rate as at 6 August 2019).

  In terms of the Listings Requirements of the JSE Limited ("the JSE")
  ("the Listings Requirements"), ICBC is considered a related party in
  relation to Standard Bank Group.

2. Background on ICBCA

  ICBCA is a leading universal banking operation in Argentina, offering
  a comprehensive range of banking and other financial services to its
  customers. ICBCA is highly profitable and well capitalised.

3. Rationale

  After the group’s 2011 strategy refocus on the African continent, the
  group divested of control of ICBCA to ICBC in a transaction announced
  on 5 August 2011.

  ICBCA has performed strongly since the change of control from a
  financial perspective. However, Argentina remains off strategy for
  the group as a geography and there is little overlap in the client
  bases of Standard Bank Group and ICBCA.

  With the transition of control of ICBCA to ICBC an unqualified
  success, Standard Bank Group considers that an exit from its
  investment in ICBCA to realise capital for reinvestment into its
  African strategy is appropriate.

4. Other salient financial information

  Based on the unaudited financial information for the six months ended
  30 June 2019, prepared under IFRS:

  As at 30 June 2019, the group carried its associate shareholding in
  ICBCA at a net asset value (“NAV”) of R1 579 million with the
  investment contributing R432 million in profits attributable to the
  group reported as headline and IFRS earnings for the six-month period
  ended 30 June 2019.

  For indicative purposes, at 30 June 2019, the accumulated debit
  balance in relation to ICBCA to the group’s Foreign Currency
  Translation Reserve (“FCTR”) was R2.9 billion.

  Upon completion of the Proposed Transaction, the group would be
  required to release the FCTR balance to earnings outside of headline
  earnings. This movement between reserves will not impact the NAV of
  the group.

  The difference between the disposal price of the investment in ICBCA,
  after applicable taxes, and the group’s carrying value in ICBCA would
  be recognized as a gain outside of headline earnings.  Based on
  30 June 2019 IFRS values, this gain would be approximately
  R600 million.

5. Independent fairness opinion

  In terms of paragraph 10.7 of the Listings Requirements, the Proposed
  Transaction is categorised as a small related party transaction.

  Accordingly, the board of directors of Standard Bank Group (“Board”)
  is required to provide the JSE with written confirmation from an
  independent professional expert confirming that the terms of the
  Proposed Transaction are fair insofar as shareholders of Standard
  Bank Group (“Shareholders”) are concerned.

  In compliance with paragraph 10.7(b) of the Listings Requirements,
  JPMorgan Chase Bank, N.A., Johannesburg Branch ("J.P. Morgan") was
  appointed by the Board as the independent professional expert and has
  furnished an opinion to the Board confirming that the terms of the
  Proposed Transaction are fair insofar as the Shareholders are
  concerned.

  The opinion of J.P. Morgan will lie for inspection at Standard Bank
  Group's   registered   office,  9th floor,   5   Simmonds   Street,
  Johannesburg, for a period of 28 days from the release of this
  announcement.

6. Exercise of the put   option, conditions   precedent   and timing   of
   completion

  The Board has resolved to exercise the put option and to authorise
  SBLH to give the requisite notice to ICBC.

  The Proposed Transaction is subject to conditions precedent customary
  to transactions of this nature, including regulatory approvals in
  China and Argentina.

  The completion date in respect of the Proposed Transaction is
  anticipated to be in the last quarter of 2019 or first half of 2020.

  The net proceeds of the Proposed Transaction will be received at the
  date of completion. The group would seek to reinvest such proceeds to
  support its African strategy.


Johannesburg
8 August 2019

Lead sponsor
The Standard Bank of South Africa Limited

Independent Sponsor
J.P. Morgan Equities South Africa Proprietary Limited

Namibian sponsor
Simonis Storm Securities (Proprietary) Limited

Date: 08/08/2019 07:40:00
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