FirstRand unbundling insurance interests and streamlining. Parties involved in the action yesterday were Momentum, Metropolitan, FirstRand and RMB Holdings and all of their respective shareholders, lots of cross holdings. The whole bancassurance model finally being dealt with here, one of the unlocks that shareholders had been talking about for a long time.
Bancassurance definition: The sale of insurance and other similar products through a bank. This can help the consumer in some situations; for example, when a bank requires life insurance for those receiving a mortgage loan, the consumer could purchase the insurance directly from the bank. Some critics feel that bancassurance gives the bank too much control. Bancassurance is not legal in all countries, but it is legal in the United States.
We were looking for a name for Newco, Mompoli, Tumtan, Momtan, Mentol, but settled on Metromom for now. Hah. The rationale of the transaction is given as follows with the official FirstRand release:
Shareholders of FirstRand and Metropolitan are advised that FirstRand, Metropolitan and Momentum (the "Parties") have reached agreement for the merger of Momentum and Metropolitan (the "Proposed Merger"). The Proposed Merger will create a leading insurance-based financial services group and will significantly expand the product offerings, target markets and growth prospects of Momentum and Metropolitan in South Africa and elsewhere in Africa.
In the Newco (that will keep the two brands for now) FirstRand shareholders
...can anticipate to receive approximately 17.3 shares in the merged entity for every 100 ordinary shares held in FirstRand. I will try and get a graphic and post it to Twitpic later, another good reason to signup on Twitter. Come on guys. And then integrate it with your mailbox, download Twinbox, it is for free. It is not immediately apparent what is going to happen with RMB's stake, they are watching for now.