COVID-19 pandemic forces Alexander Forbes to postpone share buyback plan

Alexander Forbes Holdings has put on hold its planned share buyback from Mercer Africa, a move expected to strengthen its capital and liquidity, as well as ensure its sustainability in the coming months, the South African financial services group said Monday.

The deal was supposed to see the company purchase 200.8 million of its own shares from its largest shareholder for $56.36 million (just over 1 billion rand). But due to market volatility caused by the coronavirus outbreak, the plan has been called off, for now, Reuters reported.

The move will strengthen the group’s capital and liquidity position, “and ensure its robust sustainability through the difficult economic conditions expected over the forthcoming months,” Alexander Forbes said.

Back in January, the group announced Mercer Africa, its largest shareholder with a 34 percent stake, planned to divest almost all of its entire investment of 442.8-million shares in Alexander Forbes Group Holdings. The group was to purchase about 200-million of those shares at R5.15 per share, while African Rainbow Capital, an investment company, would buy R193-million in shares.

“As a result of the global economic turmoil caused by the Covid-19 pandemic, there has been a material change in market conditions and outlook and it is impossible to determine for how long this uncertainty will persist,” a company statement announcing the postponement reads.

While the parties have agreed to consider a possible repurchase of the shares at a later date, ARC will still acquire Alexander Forbes shares from Mercer for a similar price, increasing its shareholding to 33.9 percent. The transaction, expected to be completed in about a month, is still subject to regulatory approvals.

Headquartered and listed in Johannesburg, Alexander Forbes Group Holdings has a presence in six other countries on the African continent – Namibia, Botswana, Zambia, Uganda, Nigeria, and Zimbabwe as well as in the Channel Islands through an offshore Jersey operation.

So far in 2020, Alexander Forbes’ share price has fallen by more than a third while the Johannesburg Stock Exchange has fallen by about 29 percent driven by a second South African economic recession in four years and the new coronavirus outbreak.