Sanlam beefs up its BEE status

Insurance company aims to increase black shareholding through equity issuance.

Sanlam intends to increase the direct black shareholding through an equity issuance to fund its multibillion-rand buyout of pan-African insurance group SAHAM Finances.

The group said in March that it would buyout the remaining 53.37% shareholding in SAHAM for $1.05 billion (R16 billion), after partnering with subsidiary Santam to buy just over 46% of the business between 2016 and last year.

Delivering results for the six months ended June 20, Sanlam said: “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.” Its dollar commitment is hedged at an average rate of R13.24.

The transaction is to be funded through an equity raising, the first of such since demutualisation in 1998.

The first phase, 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 (B-BBEE) vehicle, both to raise funds for the transaction and to increase its discretionary capital portfolio.

Group chief executive Ian 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.

The empowerment issuance is subject to shareholder approval together with its B-BBEE 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 – across north, west and east Africa as well as the Middle East – in which it operates.

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 taxing operating conditions. Sanlam, per an existing policy, does not declare an interim dividend.