Trustco Group, an investment holding company majority owned by Namibian businessman Quinton van Rooyen and his family, has announced its intention to issue new shares to the U.S. fund Riskowitz Value Fund LP (RVF) for an equity investment of up to NAD950 million ($50 million). It signifies a strategic partnership and a significant cash infusion into Trustco.
In a recent JSE notice, Trustco detailed its plan to issue new shares to RVF through an option, solidifying RVF’s position as a key anchor investor with a cash injection of up to $50 million. This investment is expected to expedite ongoing value-creation initiatives within Trustco, including share buybacks and dividend payments.
As part of the agreement, Trustco aims to increase its equity stake in Legal Shield Holdings (LSH) by acquiring an additional 11.35 percent from RVF, ultimately raising its stake to 91.35 percent.
LSH is the parent company of Trustco Life and Trustco Insurance, holding Namibian long-term and short-term insurance licenses, respectively. Notably, LSH was also the holding company for Constantia Insurance in South Africa, which was liquidated by the Prudential Authority in 2022.
Trustco issues share price warning amid RVF transaction success
Trustco cautions that the success of the transaction with RVF may have a material impact on its share price. As of Jan. 2, 2024, Trustco’s shares closed at R0.50 ($0.026) on the Johannesburg Stock Exchange (JSE).
Trustco Group, predominantly managed by the van Rooyen family, boasts a significant ownership stake of 63.94 percent held by van Rooyen. This substantial ownership, totaling 1,004,000,060 ordinary shares, positions van Rooyen as one of Namibia’s wealthiest individuals.
In its financial results for the 12 months ending August 31, Trustco reported a 37-percent decline in net asset value per share (NAVPS) to NAD1.17 ($0.0616), compared to NAD1.86 ($0.098) for the same period in 2022. Despite this decline, directors emphasized that Trustco closed the year on a “solid financial footing” with NAD1.15 billion ($60.62 million) in shareholders’ equity.
Investment portfolio and valuation challenges
Trustco’s diverse investment portfolio, valued at NAD3.1 billion ($163.4 million) as of Aug. 31, encompasses various sectors, including insurance, real estate, banking, micro-finance, education, and mining.
However, during the financial year, the portfolio experienced a decline in valuations, primarily attributed to a surge in discount rates totaling 11.68 percent.
Despite the challenges, forecasts suggest a potential moderation in discount rates, hinting at a reversal in valuation declines in the upcoming years. Trustco remains optimistic about the strategic investment from RVF and the potential positive impact on its ongoing initiatives.
