UPDATE 2-S.Africa's FirstRand down after top owner says to distribute $8.8 bln stake

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UPDATE 2-S.Africa's FirstRand down after top owner says to distribute $8.8 bln stake
Credit: © Reuters.

(Adds analyst comment)

JOHANNESBURG, Nov 20 (Reuters) - FirstRand FSRJ.J shares fell 4% on Wednesday a day after top investor RMB Holdings (RMH) announced plans to distribute its 130 billion rand ($8.77 billion) stake in the South African bank to its own shareholders.

Investment holding firm Remgro REMJ.J holds a 28% stake in RMH RMHJ.J and a 4% stake in FirstRand and will also distribute these stakes to its shareholders, severing the bank's ties to its parent and original founders.

RMH CEO Herman Bosman told Reuters on Wednesday that unbundling its stake, which ends a more than two-decade relationship, could unlock between 10 billion and 20 billion rand in value for its shareholders.

RMH shares trade at a discount of 8-12% to its investment portfolio, of which its 34% stake in FirstRand is its most significant asset, Bosman said.

"On the one hand you've got 15 billion of unlocked value ... and you weigh that up against the benefits of the structure," he said in an interview.

"Given the size and maturity and the stage of development (of FirstRand), the value add that we do bring is not commensurate with the opportunity cost."

David Shapiro, deputy chairman at Sasfin Securities, welcomed the transaction, saying the unwieldy structure of the investments spanning the three companies was over-complicated.

"It's meaningless," he said. "All you do is you lock value up."

For FirstRand shareholders, however, the transaction means some investors that end up with RMH, Remgro and FirstRand shares in their portfolio may decide to sell, he said.

RMH shares were up 4.57% at 1221 GMT, while Remgro shares were up 5.79%. FirstRand shares had pared their earlier losses to stand down 1.52%.

($1 = 14.8194 rand)

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