Manager Research

Prescient recently announced that Sithega Holdings has signed binding term sheets to buy a controlling stake in the business. Stellar Capital Partners, which currently owns 48.82% of Prescient Holdings, have been negotiating the deal with Sithega and the transaction will result in a dilution of Stellar’s shareholding. Prescient’s founders, Guy Toms and Herman Steyn, are set to retain their ownership stakes and responsibilities in the business. The transaction is expected to be finalised in the fourth quarter of this year.

Stellar’s dilution of it’s shareholding in Prescient follows their disposal of Cadiz to Warrick Wealth in May (see our comment here) and their proposed delisting of Torre, in which they own a 57% stake. Christo Wiese owns more than R500million in Stellar preference shares that are maturing in May 2019. The problem Stellar faces is that they are fully invested and therefore have to liquidate their holdings to finance the maturing preference shares to Wiese.

Sithega Holdings is a black-owned and managed investment holding company under the direction of CEO Thabo Dloti. Thabo has substantial experience in managing and driving transformation in investment and insurance businesses. His career, which spans 27 years, includes roles as CEO of the Old Mutual Investment Group (OMIGSA), Stanlib and most recently of Liberty Holdings. Despite Thabo’s impressive track-record, Sithega is still in the development phase and therefore its intentions and track record as a shareholder are unclear. Prescient did mention that Sithega will participate in driving growth and building scale, so their involvement will likely be active.

As a positive, the improved BEE credentials of the new structure and Sithega’s commitment to driving growth in the business is likely to attract new flows which could improve stability over time. Part of the deal is also to facilitate a share scheme to incentivise strategic staff and reduce the concentration of equity in the founders, which we have been concerned about for a while.

The ongoing business changes at Prescient do concern us. The business was listed in 2012 and subsequently delisted in 2017 when Stellar bought a significant stake, which is now being sold to a new shareholder. Instability, even at the business level, distracts the investment function with unintended consequences for the funds and potentially impacting investment performance. We are meeting with the Prescient team in the next few weeks to discuss both the recent investment team changes and this latest change in shareholder announcement.