JSE and London listed investment banking group Investec has entered into a landmark empowerment deal which will see a consortium of black staff and BEE partners take a 25.1% stake in its South African business.

The group will issue 5.6m new shares and the deal will raise R500m for the local operation. The capital will remain in South Africa and while the group will not reveal how the cash will be spent, Joint MD of Investec Limited, Andy Leith said there were two potential acquisitions in the pipeline.

The decision to do the deal comes ahead of the anticipated Financial Services Charter that is still in the process of being formulated. But chief executive Stephen Koseff said it was broadly within the empowerment guidelines provided by the Department of Trade and Industry.

“Investec appears to have raised the bar in terms of empowerment,” said an analyst, suggesting other financial services groups would need to take a close look at their BEE policies.

The transaction means a consortium made up of Tiso Group, Peu Investment Group, an Entrepreneurship Development Trust, set up specifically for the deal along with an Investec Employee Share Trust have effectively acquired a quarter of the issued share capital of Investec Limited. It gives them access to 10% of Investec’s global profits.

Unlike other empowerment deals in the financial services sector so far, the acquisition encompasses all of Investec's business; Investment Banking, Asset Management, Private Client and Treasury and Finance.

"It's an important step in our future development in this country," Koseff said. "To be relevant in the future you will have to make an appropriate contribution to empowerment."

Leith told Moneyweb, “It was important that this deal be done at the highest level in the group, this way there can be no conflicts of interest, lower down, we’ve been very specific ensuring that it’s a broad based deal.”

The Public Investment Commissioners will help to finance the transaction, which is being done at R90 a share, a slight discount to the ruling price. Investec share price has seen a substantial recovery from R75 a share in March to its close at R96 on Thursday afternoon. Precise details of how the deal is being structured are being kept confidential.

Investec’s relationship with both Peu and Tiso dates back to the mid 90’s, a fact says Koseff which is critical to the long-term sustainability of the deal, which he says is the culmination of a two-year project within the group to boost its empowerment credentials.

Peu executive chairman Peter Malungani already serves on the boards of Investec Limited and Investec Bank while Tiso’s Fani Titi is also represented on the Bank board. The new shareholding is likely to see a shakeup at board level but that topic has not yet been broached.

“We didn’t want to be caught in the same position as the mining sector,” Leith said, “so we’ve been proactive with our partners with whom we’ve had a long-standing relationship.”

Investec’s black employees stand to benefit through the setting aside of 1,9 million unallocated shares from existing Investec share schemes.

Banking shares on the JSE fell sharply on Thursday, but Stanlib financial services analyst Nigel McKenzie attributed the 3% decline in the banks index to the weakening rand. “An international investor with money in Standard Bank has probably lost about 15% over the past three days,” he said explaining Thursday’s sharp drop.