Asset manager and investment bank Investec Ltd. (INL.JO) Tuesday said it has struck a deal to buy the outstanding 53% stake in Rensburg Sheppards PLC (RBG.LN) in an all-share deal that values the British wealth manager at about GBP412 million.

The acquisition is part of the dual Johannesburg- and London-listed company's strategy of increasing the proportion of its non-lending revenue base. It has maintained a significant stake in Rensburg Sheppards since mid-2005, when it was created through the reverse merger of Investec's Carr Sheppards Crosthwaite Ltd.'s business with the then Rensburg PLC.

"Rensburg Sheppards has been a good investment for Investec over the past few years and the proposal we have announced today is the natural next step for both businesses," Investec Chief Executive Officer Stephen Kosseff said.

Analysts said the price being offered appears fair, although it could encourage rival suitors to step forward. Rathbone Brothers PLC (RAT.LN), which specializes in managing money for wealthy individuals, lost out to Investec in bidding for Rensburg in 2005.

Investec said it will offer 1.63 newly issued shares for each Rensburg Sheppards share. That values each Rensburg Sheppards' share at 916 pence, a premium of 48% to the closing price Monday. The shares issued by Investec will represent about 7.8% of the company's issued share capital.

There is little overlap between the two companies and Investec said it plans to maintain the Rensburg Sheppards brand and executive management team.

"The offer values Rensburg Sheppards at a significant premium to its current share price and the offer consideration is in the form of a more liquid FTSE 100 security," said Christopher Clarke, chairman of Rensburg Sheppards.

Rensburg Sheppards' independent directors have recommended the offer, and Investec said it has letters of intent to vote for the deal from Schroders Investment Management Ltd. and BlackRock Investment Management UK Ltd., which hold stakes of about 7.7% and 2.9% in Rensburg Sheppards.

"Although we would not anticipate material cost synergies, the risk of clients defecting that generally accompanies M&A [mergers and acquisitions] in this sector would seem to be very low in this instance," Canaccord Adams Ltd. analysts Katrina Hart and Ian Poulter wrote in a research report.

They said the price offered by Investec is generous, in part reflecting a low execution risk to the deal.

Counter offers are possible, even likely, said Sarah Spikes, an analyst at Arden Partners in London. "Rathbone could counteroffer for Rensburg as they did in 2005," she said, adding it was worth noting Investec's offer is "all paper."

Fenchurch Advisory Partners acted as financial advisor to Rensburg Sheppards, while Goldman Sachs International advised Investec.

At 0952 GMT, Investec Ltd. shares were down 2.3% at ZAR63.68 in Johannesburg, while in London Rensburg Sheppards shares were up 40% at 871 pence.

-By Robb M. Stewart, Dow Jones Newswires; +27 11 783 7848; robb.stewart@dowjones.com
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