The acquisition of Prescient’s financial services (PFH) operations by Stellar Capital, a JSE listed investment holding company with a reported net asset value of R1.42bn, is expected to complete by the end of this year.

The transaction is subject to various regulatory approvals, which are expected to be received by December 31, 2016.

Following completion, Stellar Capital expects to hold a strategic interest of 40% to 50% in Prescient’s financial services operations. 

The final percentage is dependent on various elections made by Prescient’s existing shareholders.

The cash consideration is dependent on the election made by Prescient’s existing shareholders, however the maximum cash consideration is expected to amount to R860m.

“The investment is an exciting transaction for both Prescient and Stellar Capital, which is expected to result in significant benefits for Stellar Capital, PFH and Prescient shareholders and clients,” the companies told Africa Global Funds in a joint statement.

Stellar Capital will acquire a strategic interest in a proven, scalable and diversified financial services business with exciting growth prospects.

“Stellar Capital is acquiring its interest at a fair valuation and will be able to add long term value via its network of relationships.”

PFH management shareholders will reinvest in the business and new management retention arrangements will be agreed, ensuring the commitment of the team to the success of PFH in the long term.

"New BEE ownership deals are expected to be completed at the level of PFH and Prescient Investment Management Proprietary Limited, enhancing the competitive position of PFH."

Prescient have already complete BEE transactions in Prescient Securities and African Collective Investments.

For Prescient shareholders, the proposed transaction, combined with the retention of PBT Group shares (which will remain listed on the JSE), is expected to result in a value unlock as Prescient has traded at a discount to the fair value of the two component parts of its business.

Proceeds from Stellar Capital’s investment will be distributed as a cash distribution to Prescient’s existing shareholders, who may elect to apply the cash distribution to either i) retain the cash received, ii) subscribe for Stellar Capital shares at R1.71 or iii) acquire shares in Prescient’s unlisted financial services operations.

This acquisition will be Stellar Capital’s third deal in the financial services sector, after it bought Cadiz Asset Management and Praxis Financial Services.

Stellar Capital said that whilst the primary focus will be on completing the announced transaction, new BEE ownership transactions are expected to be completed within Prescient’s financial services operations.

“We do believe that the best form of growth is organic growth, but Prescient will be looking for some acquisitions in jurisdictions where they believe they can add value,” the company said.