Sanlam to buy stake in African Rainbow Capital unit
Sanlam plans to up its stake in the financial services assets of Patrice Motsepe's African Rainbow Capital, which include TymeBank.
The proposed transaction will involve Sanlam Life acquiring a 25% interest in African Rainbow Capital Financial Services Holdings (ARC FSH).
ARC FSH houses all the financial services investments of Ubuntu-Botho Investments (UBI), other than its shareholding in Sanlam, which is held directly by UBI. These financial services assets include a controlling stake in TymeBank, and stakes in Alexander Forbes, diversified healthcare group AfroCentric and the mortgage originator Ooba.
ARC, which was founded in 2015, is wholly owned by UBI, which is Sanlam's broad-based black economic empowerment partner. ARC was founded by Sanlam deputy chair Motsepe.
The complicated deal structure announced on Monday will involve Sanlam Life paying just over R2.4 billion for the stake in ARC FSH in exchange for shares. It will simultaneously dispose of its 25% stake in ARC Financial Services Investments (ARC FSI), valued at about R1.5 billion, to ARC FSH, which will pay for that investment by issuing new shares equal to that value to Sanlam Life.
ARC FSI is 75% owned by ARC FSH. Once the proposed deal has been finalised, ARC FSH will hold 100% of the shares in ARC FSI.
Natural extension
Sanlam acquired a 25% non-controlling minority stake in ARC FSI in 2021.
"The proposed transaction is a natural extension of Sanlam's existing interest in ARC FSI," the company said in a statement. "Sanlam will continue to explore ways to collaborate strategically with ARC FSH and its portfolio investments to enhance competition and to assist Sanlam in providing holistic and integrated product offerings to its clients."
"The transaction adds value for shareholders as Sanlam is swapping its current investment for a higher-returning one at a reasonable price," Adrienne Damant, an analyst at Avior Capital Markets, commented in a Bloomberg report. "Additionally, we believe Sanlam can leverage TymeBank’s distribution network to sell insurance products to South Africa’s mass market."
The deal has a long list of suspensive conditions, including that a new ARC FSH memorandum of incorporation must be filed at the Companies and Intellectual Property Commission (CIPC).
Sanlam Life will also have to pay ARC an outperformance fee, capped at R70 million including value-added tax (VAT), if the value of Tyme group’s Asian investments exceeds an annual hurdle rate of 14.64%.
Since the proposed deal is considered a small-related party transaction, Sanlam’s board appointed Deloitte to provide an independent opinion on the fairness of the terms to its shareholders. This opinion has been provided to Sanlam’s board as well as the Johannesburg Stock Exchange.
ARC FSH's after-tax profit for the six months ended 31 December 2023 amounted to R1.81 billion, while its net asset value was R11.99 billion. ARC FSI's profit after tax over the same time frame was R610 million, and its net asset value was R5.1 billion.
-FIN24-
The proposed transaction will involve Sanlam Life acquiring a 25% interest in African Rainbow Capital Financial Services Holdings (ARC FSH).
ARC FSH houses all the financial services investments of Ubuntu-Botho Investments (UBI), other than its shareholding in Sanlam, which is held directly by UBI. These financial services assets include a controlling stake in TymeBank, and stakes in Alexander Forbes, diversified healthcare group AfroCentric and the mortgage originator Ooba.
ARC, which was founded in 2015, is wholly owned by UBI, which is Sanlam's broad-based black economic empowerment partner. ARC was founded by Sanlam deputy chair Motsepe.
The complicated deal structure announced on Monday will involve Sanlam Life paying just over R2.4 billion for the stake in ARC FSH in exchange for shares. It will simultaneously dispose of its 25% stake in ARC Financial Services Investments (ARC FSI), valued at about R1.5 billion, to ARC FSH, which will pay for that investment by issuing new shares equal to that value to Sanlam Life.
ARC FSI is 75% owned by ARC FSH. Once the proposed deal has been finalised, ARC FSH will hold 100% of the shares in ARC FSI.
Natural extension
Sanlam acquired a 25% non-controlling minority stake in ARC FSI in 2021.
"The proposed transaction is a natural extension of Sanlam's existing interest in ARC FSI," the company said in a statement. "Sanlam will continue to explore ways to collaborate strategically with ARC FSH and its portfolio investments to enhance competition and to assist Sanlam in providing holistic and integrated product offerings to its clients."
"The transaction adds value for shareholders as Sanlam is swapping its current investment for a higher-returning one at a reasonable price," Adrienne Damant, an analyst at Avior Capital Markets, commented in a Bloomberg report. "Additionally, we believe Sanlam can leverage TymeBank’s distribution network to sell insurance products to South Africa’s mass market."
The deal has a long list of suspensive conditions, including that a new ARC FSH memorandum of incorporation must be filed at the Companies and Intellectual Property Commission (CIPC).
Sanlam Life will also have to pay ARC an outperformance fee, capped at R70 million including value-added tax (VAT), if the value of Tyme group’s Asian investments exceeds an annual hurdle rate of 14.64%.
Since the proposed deal is considered a small-related party transaction, Sanlam’s board appointed Deloitte to provide an independent opinion on the fairness of the terms to its shareholders. This opinion has been provided to Sanlam’s board as well as the Johannesburg Stock Exchange.
ARC FSH's after-tax profit for the six months ended 31 December 2023 amounted to R1.81 billion, while its net asset value was R11.99 billion. ARC FSI's profit after tax over the same time frame was R610 million, and its net asset value was R5.1 billion.
-FIN24-
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