Super Group sells insurer to Santam
July 13, 2009
By Artwell Dlamini
Distressed Super Group has sold its insurance business, Emerald Insurance Company, to short term insurer Santam.
The transport and logistics group said on Friday the value of the deal was equivalent to the tangible net asset value of Emerald, an underwriter in property and engineering insurance, on the date of acquisition.
This disposal would give Super Group a much-needed boost in its attempt to get rid of noncore businesses as it restructures itself and addresses its liquidity woes.
But the company's disposal plan faces challenges as conditions are unfavourable to asset sales.
Super Group has also lined up its retail business, which contributes almost a quarter of its revenue, as a noncore asset earmarked for disposal.
The company said the Emerald deal was subject to approval by the Competition Commission and the registrar of short-term insurance.
Proceeds of the Emerald sale would be used to settle part of Super Group's short-term debt, to be restructured shortly after the recapitalisation and debt plan.
Up to 60% of the provisionally calculated purchase consideration would be settled in cash, and the remaining 40% payable after final determination of tangible net asset value of Emerald, which contributed revenue of R439,9m to Super Group in the past financial year.
Super Group has three divisions, supply chain management, automotive and fleet solutions. It said talks on potential disposal of Autozone and Mica, part of the retail unit, were in progress. Late in May, the group said it had entered into talks with the aim of disposing of this retail business.
The group said it had yet to unveil its proposed restructuring programme and details of its R2bn rights issue.
Emerald's tangible net asset value would be "determined with reference to the unconsolidated audited financial statements of Emerald as at the effective date, with an adjustment to account for the difference between the carrying value and the fair value of Emerald's 38% shareholding in Emerald Risk Transfer (Proprietary) Limited and the carrying value of noncore assets".
The purchase consideration would be increased by a portion of the profits on the release of excess reserves as at the effective date. - I-Net Bridge
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