Sanlam starts 2017 brightly
SANLAM has kicked off the new year in style, announcing this week that it had bought a stake in BrightRock for about R707-million.
This is the latest in a string of acquisitions as the group seeks to grow its footprint in South Africa, throughout the rest of the continent and in other emerging markets like India.
The BrightRock partnership will be a small component of the group’s market capitalisation — 0.5% of Sanlam’s total market capitalisation. But Adrian Cloete, a portfolio manager at PSG, said it was strategically important for the insurance group. The two companies will continue to operate as independent businesses.
Sanlam Personal Finance CEO Hennie de Villiers said it was important to ensure that the two brands and what they offered were not diluted.
“We bought them because they are quite differentiated from the rest of the market, so it makes no sense to just turn them into Sanlam,” said De Villiers.
BrightRock CEO Schalk Malan said maintaining the branding was important.
“We’ll distribute through Sanlam, but those products will still be serviced by us.”
He said that having access to Sanlam’s distribution channel, and the injection of capital, would play a big role in growing BrightRock’s client reach.
Despite the transaction being modest in terms of Sanlam’s market cap, Cloete said it was a “profitable and sustainable growth opportunity that should give a much better return than the current investment return that the R707-million was earning as part of the discretionary capital”.
De Villiers said that Sanlam would look out for opportunities that could add value.
“Typically every half-year results, we disclose how much discretionary capital we have and if we find the right opportunity we use some of that to go after it,” he said.
Across the rest of the continent, Sanlam holds a 46.6% stake in Saham Finances, a Moroccan insurance company that operates in 26 countries in East, West and North Africa, and in the Middle East.
Cloete said: “The new relationship with the Saham group has potential to add huge value for Sanlam shareholders.”
Sanlam also bolstered its stake in India’s Shriram Life
Partnering with a local firm in a foreign country reduced risk
and Shriram General Insurance to 49% in November. This was after India’s regulators amended regulations to allow foreign companies to hold up to 49% in insurance companies.
Cloete said partnering with a local firm in a foreign country reduced risk. The local partner was likely to add value because of its detailed knowledge of the complexities in that market.
“Sanlam is also right to follow the acquisitive route as it takes a very long time to build up businesses in new territories to decent size,” said Cloete. De Villiers said the transaction was still awaiting approval from the Competition Commission.
“We hope to conclude it by the middle of the year, but it’s very difficult to say at this stage,” he said.