Here’s what PSG plans to do with its Capitec windfall

PSG, the investment holding group, is set to close the chapter on its status as Capitec's largest shareholder. The decision to divest from Capitec was primarily driven by looming regulatory constraints that would significantly impact PSG's operations. CEO Piet Mouton revealed that discussions with regulatory authorities in March highlighted the need to comply with regulations as a financial conglomerate, prompting the decision to offload the majority shareholding in Capitec. The stringent regulations would require PSG to allocate capital, adhere to approval frameworks for non-regulatory entities, and make significant appointments, imposing a timeline that wouldn't align well with the current economic climate overshadowed by the COVID-19 pandemic. Mouton emphasized the exceptional quality of Capitec as a company and its crucial role as a cash cow for PSG. However, with the regulatory deadline looming, PSG had to act swiftly. As PSG looks to diversify and fill the void left by Capitec, Mouton outlined a strategic plan that focuses on ensuring liquidity at the group level to support existing companies within the group and capitalize on new opportunities. The CEO expressed optimism about the growth prospects of companies remaining within the group, such as Consult, Heroes, Energy Partners, and Evergreen Studio. While acknowledging the uncertainty in the current market due to the pandemic, PSG remains vigilant in evaluating potential opportunities that align with the evolving economic landscape. In a candid letter to President Ramaphosa regarding the economic impact of COVID-19, Mouton advocated for a faster reopening of the economy, citing practical challenges faced by businesses under current restrictions. He urged for a balance between public health concerns and the need to kickstart economic activities, particularly for healthy individuals at low risk, to avoid long-term economic repercussions. Discussing the unbundling of Capitec shares, Mouton clarified that PSG shareholders would receive 14 Capitec shares for every 100 PSG shares, resembling a distribution process akin to dividends. The expected transaction completion in August will see PSG retaining a 4.3% stake in Capitec, with the remaining shares serving as a financial reserve for future investments. The unbundling of 28.11% of Capitec shares is estimated to yield around 4.5 billion Rand based on the current trading prices. This strategic move signifies PSG's commitment to adapt to regulatory changes and explore new avenues for growth amid a challenging economic environment. As PSG navigates this transition, the focus remains on securing the financial stability of the group and seizing opportunities that align with its strategic vision.