Johannesburg, August 8, 2019 – 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 (“SBLH”).
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).
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. 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.
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 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 Net Asset Value (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.
The Board has resolved to exercise the put option and to authorise SBLH to give the requisite notice to ICBC. 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.
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