Sanlam, ARC tie-up remains on the agenda
● Johan van Zyl, co-CEO of African Rainbow Capital Investments, known as ARC, describes the prospect of his group taking a stake in Sanlam’s asset management business as just an idea at present, but he admits it is one both parties have been pondering for some time.
There is an agreement for ARC to take a stake in Sanlam Investment Management (SIM) that was drawn up more than five years ago, he said.
To take the deal forward requires that each party meet certain criteria. One factor “is to investigate whether it is feasible to have ARC as a partner in the investment management [business]. We have done this [investigation] two or three times over the past years and we could not get to an agreement,” Van Zyl said. He did not specify what the other stumbling blocks weLLre.
The prospective deal is still under discussion, along with number of other deals, Van Zyl said. Questions about it were similar to those he had to field during his tenure as Sanlam CEO about Sanlam’s acquisition of Santam. Each year they would look at the Santam deal, have a discussion and decide not do it because the time was not right.
In terms of the ARC acquisition of SIM, Van Zyl said that up until now neither side had been able to “tick the boxes” and Sanlam’s discussion with ARC had been brief. But he is aware that within Sanlam there had been lengthy discussions on the subject.
Van Zyl said ARC’s board had not seen a firm proposal and the discussion had not gone beyond management level.
But SIM is not the only prospect for ARC. Van Zyl said that “while we do not have another deal in the pipeline, if we find something else which makes better sense” ARC would proceed with that option unless Sanlam came up “with something that is as good. If they say no, go ahead, then we will go ahead.”
His gut feeling was that ARC “may be going” towards a tie-up with SIM “but I think there may be better deals with others”.
Van Zyl said that asset management was a key area that ARC wants to invest in but there were cheaper options than SIM.
There are areas in asset management where empowerment is a critical driver and if a company is more than 50% empowered there are substantial advantages and benefits for the asset manager to bring in business. This is one of the benefits ARC could bring to SIM.
Compared to some of the other insurers in the South African market, Sanlam is doing well.
Van Zyl said that though there are areas in which ARC could assist, there was not much it could add to SIM, which explains why ARC hasn’t done a deal yet.