31 October 2018
Sanlam intends to issue shares constituting in aggregate 5.0% (five per cent) of the enlarged issued Sanlam ordinary shares (net of treasury shares) to a new broad-based group of empowerment shareholders and UB. The proposed transactions will increase economic inclusion as new broad-based beneficiary groups focused on black women and youth as well as Sanlam’s South African employees, will participate in 80% of the new shares to be issued. UB will participate in the remaining 20%.
As a result of the B-BBEE Transaction, Sanlam will be a Level 1 Contributor and will increase direct black ownership in Sanlam to over 18% and black economic ownership (combined direct and indirect) to over 35%, as measured in terms of the Financial Sector Code (FSC). This will place Sanlam in a strong, market leading position in terms of empowerment.
The issuance of new shares will also strengthen Sanlam’s balance sheet. The proceeds from the B-BBEE transaction will be used to redeem the short-term debt facilities recently raised in acquiring the remaining 53.37% shareholding in Morocco-based SAHAM Finances. This will enable Sanlam to retain its balance sheet flexibility and strength, in line with its prudent balance sheet management strategy.
The Group also plans to provide a R2 billion facility to UB or its subsidiaries to support the execution of Sanlam’s empowerment strategy. This will be achieved by enabling UB to acquire, directly or indirectly, an interest in specific operating subsidiaries of the Sanlam Group and will also facilitate investment by UB in financial services companies that will be complementary to the broader Sanlam Group’s vision and strategy. 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.
African Rainbow Capital Financial Services (ARC FS) will assist Sanlam in the execution of its South African strategy. Therefore, in addition to providing Ubuntu-Botho facility, there is an in principle agreement that Sanlam or a wholly-owned subsidiary of Sanlam will, subject to definitive agreements, acquire a 25% stake in ARC FS from African Rainbow Capital (“ARC”)
There is general consensus that in order to achieve higher and sustained economic growth in South Africa and thereby enable the conditions for companies to do well, the country must overcome the current situation where the bulk of people do not participate in economic output and consumption. Consequently, institutional clients want to see companies like Sanlam facilitate inclusive wealth creation. While direct broad-based black ownership at 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.
Should these potential transactions at the operating business unit level be concluded, Sanlam expects to have broad-based black economic ownership (as measured in terms of the FSC) in excess of 51% in these operating business units.
“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. We believe the proposed transactions are well aligned to the national agenda and will build on the highly successful strategic partnership which Sanlam and Ubuntu-Botho have forged over the past 14 years. We anticipate that the economic benefits will outweigh the costs over time, creating value for shareholders and other stakeholders,” said Sanlam CEO Mr Ian Kirk.
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. South Africa is the largest insurance market in Africa by some considerable margin.
Sanlam believes these transactions will position the Group well in its efforts to gain profitable market share in strategic areas in which empowerment is a priority for key decision makers.
Transformation has been a critical factor in Sanlam’s growth and success over many decades. Specifically, the partnership between Sanlam and UB has been one of the most successful empowerment partnerships in South Africa. It created value of over R14 billion for broad-based black shareholders when the first 10-year transaction matured.
“Sanlam and Ubuntu-Botho have demonstrated that combining strategic relationships between black investors and established business with broad-based black empowerment and entrepreneurship can create long-term value as it delivers both commercial benefits and meaningful economic transformation,” UB Chairperson, Mr Patrice Motsepe, said.
From April 2004, when the original empowerment transaction was signed to maturity in April 2014, Sanlam’s market capitalisation increased from R27 billion to R118 billion, partly due to the successful execution of its strategy which embraced transformation in conjunction with UB. Sanlam’s partnership with UB has contributed to Sanlam’s growth and success over the years. UB has remained supportive and involved with Sanlam’s strategy in South Africa and extended and expanded its strategic relationship with Sanlam.
“The Group’s transformation drive over the past 25 years has demonstrated the importance of strategic partnerships. It has helped to create wealth for black shareholders and to support the creation of new black owned enterprises and has created value for Sanlam shareholders and other stakeholders. These transactions will continue that imperative,” Mr Kirk said.
SENS AnnouncementInterview with Ian KirkInvestor Presentation