Great BEE transactions for Sanlam

Sanlam has announced details of its Black Economic Empowerment (BEE) deal which will see it increasing its direct black shareholding to 18% and black economic ownership to 35%. The deal has three parts to it. In the first, the company will issue new shares, equivalent to 5% of the enlarged share pool, to a group of new shareholders that include women, youth, employees as well as its existing shareholder Ubuntu Botho – controlled by Patrice Motsepe and invested in Sanlam since 2004.

This transaction is worth about R8 billion, depending on the final price of the Sanlam shares, and will be funded by Sanlam and Standard Bank. It’s structured over a seven-year period.

The first BEE deal, which was structured in 2004 and saw 14% of the firm transferred to partner Ubuntu Botho, is debt free.

The second leg of the deal will see Sanlam loan R2 billion, at commercial rates, to Ubuntu Botho. It will use this to acquire a 25% stake in Sanlam Investment Management (SIM), taking its controlling stake to over 51%.

“This is a repositioning of SIM,” says Sanlam chief executive Ian Kirk. The balance of the funds will be used to invest in other financial sector businesses. These investments, he explains, will be in areas where Sanlam has traditionally been weak, such as healthcare, employee benefits, and entry-level life.

The third leg of the deal will see Sanlam acquire a 25% stake in ARC Financial Services from African Rainbow Capital.

The issuance of new shares will strengthen Sanlam’s balance sheet. The proceeds from the BEE transaction will be used to redeem about R4 billion of the short-term debt facilities raised in acquiring the remaining 53.37% shareholding in Morocco-based Saham Finances. This will enable Sanlam to stabilise its balance sheet.