Sanlam announces BEE transactions worth R11 billion

Sanlam has announced details of its much-anticipated BEE deal which will see it increasing its direct black shareholding to 18% and black economic ownership, which combines direct and indirect holdings, to 35%.

The deal has three parts to it.

In the first, the company will issue new shares, equivalent to 5% of the enlarged share pool, to a  group of new shareholders that include women, youth, employees as well as its existing shareholder Ubuntu Botho, which is controlled by Patrice Motsepe and has been invested in Sanlam since 2004.

This transaction is worth about R8 billion, depending on the final price of the Sanlam shares, and will be funded by Sanlam and Standard Bank. It is structured over a seven-year period. The first BEE deal, which was structured in 2004 and saw 14% of the firm transferred to its partner Ubuntu-Botho, is debt free.

The second leg of the deal will see Sanlam loan R2 billion, at commercial rates, to Ubuntu Botho. It will use this to acquire a 25% stake in Sanlam Investment Management (SIM), taking its controlling stake to over 51%. “This is a repositioning of SIM,” says Sanlam CEO Ian Kirk. The balance of the funds will be used to invest in other financial sector businesses. These investments, he explains, will be in areas where Sanlam has traditionally been weak, such as healthcare, employee benefits, and entry-level life.

The third leg of the deal will see Sanlam acquire a 25% stake in ARC Financial Services from African Rainbow Capital. “What we are doing is deepening and extending our relationship with Ubuntu Botho,” Kirk says.

The issuance of new shares will also strengthen Sanlam’s balance sheet. The proceeds from the BEE transaction will be used to redeem about R4 billion in the short-term debt facilities raised in acquiring the remaining 53.37% shareholding in Morocco-based Saham Finances. This will enable Sanlam to stabilise and strengthen its balance sheet. “The balance will be used to restore discretionary capital of about R2 billion. We have never run Sanlam with debt – we back over 200 businesses – so prefer a more conservative route. This equity issue comes at little cost to shareholders.” 

Increased black ownership at Group and operating subsidiary level is important to realising Sanlam’s vision to lead in all market segments in South Africa. “While direct broad-based black ownership at the listed company level is key, increasingly clients want to see broad-based empowerment in the operating businesses with which they are going to be doing business,” he says.

“Sanlam has a history of supporting empowerment – first for the Afrikaaners and now for black South Africans. I firmly support the Government’s assertion that our task is to build a country driven by enterprise and innovation and to develop an economy that is diverse, resilient and prosperous.”

While the acquisition of Saham Finances strengthens Sanlam’s position as a leading Pan-African financial services player, the group still generates some 70% of its operating profit in South Africa and this is the market that will continue to be important into the future.