This is one of the biggest pay-outs by an unlisted South African company to its shareholders and a once-off cash boost for thousands of people.
Assupol‚ which can trace its roots back to 1913‚ began its demutualisation process in 2010 and has now fully transformed its capital structure and shareholder base to position itself for growth in the emerging market sector within South Africa's financial services.
Importantly‚ 12‚319 policy-holders - about 7.1% of the company's 240‚582 shareholders - have opted to retain their shares and not take a cash pay-out. Assupol shares were valued at R1.26 when the demutualisation was approved in December 2010 and have since been redeemed at R2.50‚ indicating impressive underlying value growth over the past two years.
To fund its redemption exercise‚ Assupol raised R500m in equity capital‚ used internal funds and has taken a small loan. Its major shareholders are now the International Finance Corporation (19.9%)‚ Investec Bank Limited (30%)‚ WDB Investment Holdings (10.6%) and management and staff who have 26%.
In addition‚ 6.1% of Assupol shares have been reserved for the benefit of the Assupol Community Trust, which will use the income from its 25.2m shares to fund a variety of social projects.
"While we naturally would have liked to keep as many policy-holders as possible as shareholders‚ we see this as good news all round as not only have we been able to pay out a lot of valuable cash to thousands of people and make a difference in their lives‚ we have also been able to put together a very stable and complementary shareholder base that will augur well for our future growth and development‚" said company chief executive Rudi Schmidt.
Government employees account for a large percentage of Assupol's qualifying policy-holders and will receive a big chunk of the cash pay-out.
Schmidt said it was important to note that cash pay-outs to policyholders had come from Assupol's reserves and would not affect the value of any policyholders' policies - all policies will continue as normal.
"The cash distribution we have made is a timely wealth creation injection into the economy. It should have a positive ripple effect as it will improve the liquidity of thousands of people‚" he said.
According to Schmidt‚ the redemption of shares from qualifying policy-holders who prefer to get cash is the culmination of a four-year process aimed at gaining access to capital markets to fund growth‚ distribute excess reserves and satisfy the Financial Services Board's preference for a move away from a mutual society structure to a public company structure.
"The shareholder base we now have provides a powerful combination of complementary attributes that will enable us to build our business in South Africa's emerging sector where we believe there are still enormous opportunities for growth‚" he said.
"Our core shareholders have taken a long-term view and are committed to making a difference in the markets in which we operate," Schmidt said.
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