Sanlam plans acquisition of Absa’s ACA unit for R285m

JSE-LISTED diversified financial services group Sanlam has entered into agreements to acquire 100 percent of the issued share capital of Absa Consultants and Actuaries (ACA) from Absa Financial Services for a consideration of R285 million, it said yesterday.

Sanlam was planning to acquire ACA through Sanlam Life Insurance (Sanlam Life).

Sanlam said the transaction was subject to certain conditions including obtaining the necessary regulatory approvals like the Competition Tribunal approval.

ACA houses the entire employee benefits offering of the Absa Group and provides consulting on Asset, Actuarial, Health and Benefit and administration to retirement funds in the South African retirement fund market.

Chief executive of Sanlam Employee Benefits (SEB), Dawie de Villiers, said the transaction would provide SEB with further scale in a market where the opportunities to exponentially grow the administration and consulting parts of the business were limited.

“We are excited about the opportunities created by the potential transaction as it is a natural fit for our existing employee benefits administration and consulting businesses with real benefits to our clients and those of ACA,” De Villiers said.

He added that scale was fundamentally important in the employee benefits industry to ensure a sustainable business model.

ACA has a substantial book of stand-alone funds as well as a commercial umbrella fund and has in total 119 retirement funds with 339 614 members, active and inactive, and assets of R84 billion under administration.

The transaction was expected to be concluded by the end of 2017 following regulatory approval and the fulfilment of the conditions precedent.

Capitalisation Brad Preston, the chief investment officer at Mergence Investment Managers, said this deal was quite small in the context of the overall Sanlam group with the purchase price less than 2 percent of the Sanlam market capitalisation.

“(However,) the deal does strengthen Sanlam’s position in employee benefits and adds more than R80bn in assets under administration to Sanlam,” Preston said.

Jordan Weir, an equities trader at BayHill Capital, said when it came to Sanlam Life Insurance’s longer-term growth strategy, the acquisition of ACA was definitely one of a strategic nature.

“In the bigger picture, it is indicative of a move to create a more vertically integrated business model within Sanlam’s life insurance space, ultimately benefiting both client service and company, while also enabling more product offering reach to Sanlam’s clients and intermediaries alike,” Weir said.

He added that Sanlam felt the administration and consulting areas within the Employee Benefits division was an area with great potential to grow.

“The acquisition was concluded with stakeholders’ best interests being served,” he said.

Marcel de Klerk, a managing executive for fiduciary services at Absa Financial Services, said although ACA was performing well, it would benefit more from operating in the SEB environment, where the core focus is employee benefits.

“We believe Sanlam Life will be a suitable shareholder of ACA and will be capable of providing support where necessary due to its significant operations in both the private and umbrella fund markets as well as its credibility in the market place,” he said.

He added that ACA would continue to fulfil its contractual obligations to its clients as normal prior to and after the transaction is concluded.

“We therefore do not foresee a disruption in services or the quality of service that our clients have come to expect,” De Klerk said.

Sanlam shares rose 0.65 percent to close at R72.31 on the JSE yesterday.