MONEYWEB / 06 SEPTEMBER 2018 - 09.55 / PRINESHA NAIDOO
Insurance group to issue 5% of new shares to empowerment vehicle as it builds funds for SAHAM buyout.
Sanlam intends to increase the direct black shareholding in its business through an equity issuance to fund its multi-billion-rand buyout of pan-African insurance group SAHAM Finances.
Sanlam announced, in March of this year, that it would buyout the remaining 53.37% shareholding in SAHAM for $1.05 billion. Picture: Moneyweb
Sanlam announced, in March of this year, that it would buyout the remaining 53.37% shareholding in SAHAM for $1.05 billion, after partnering with subsidiary Santam to buy just over 46% of the business between 2016 and 2017.
“The acquisition of the remaining stake in SAHAM Finances will require total funding of R13 billion after allowing for an R864 million contribution from Santam to increase its effective interest in SAHAM Finances from 7% to 10%, which exceeds the current balance of available discretionary capital,” Sanlam said in delivering results for the six months ended June 20, 2018. Its dollar commitment is hedged at an average rate of R13.24, it said.
The transaction is to be funded through an equity raising, the first of such since demutualisation in 1998.
The first phase of the equity raising, namely an issuance of 3% of new shares through an accelerated bookbuild to derisk the transaction, was executed in April.
It now plans to issue a further 5% to a broad-based black economic empowerment vehicle, both to raise funds for the transaction and to increase its discretionary capital portfolio.
Kirk said the issuance of shares to an empowerment vehicle will increase Sanlam’s direct black shareholding to an “industry leading” 19%, including that of the 14% held by Ubuntu-Botho Investments.
“[This] will position us well to gain institutional business in employee benefits, third party asset management, health and distribution [in South Africa].”
He said the opportunity to participate in the new deal will be extended to Ubuntu-Botho on a minority basis alongside more broad-based institutions.
“We recognise that this is a follow-on empowerment transaction and the intent is therefore to limit any dilution to shareholders to an acceptable level, well below that of primary transactions,” Sanlam said in a Sens statement.
The empowerment issuance is subject to shareholder approval together with its broad-based black economic empowerment strategy. The timing of the empowerment transaction is dependent on that of the SAHAM transaction, which still requires approval from regulators in some of the 26 jurisdictions in which it operates. It expects to complete the buyout by year-end.
SAHAM operates in 26 countries across north, west and east Africa as well as the Middle East. The transaction will give Sanlam an ownership footprint in 19 additional countries and broaden its presence to 33 countries.
During the period under review, Sanlam reported an 8% increase in its net result from financial services to R4.4 billion. Group equity value of R60.90 per share was registered, with an annualised return on group equity value of 13.7% and an adjusted annualised return on group equity value per share of 18.2%, well above its 13% target. It described the results as “satisfactory” amid challenging operating conditions.
Sanlam, per an existing policy, does not declare an interim dividend.
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