South Africa’s Sanlam to Issue New Shares to Black Shareholders

JOHANNEBURG (Capital Markets in Africa) – Sanlam Ltd. will issue new shares to black shareholders through its black empowerment partner as it seeks to win more business from state-owned companies in South Africa.

The Cape Town-based insurer will issue 11.35 million shares, or 5 percent of its ordinary share capital, and grant a 2 billion rand ($136.6 million) facility to Ubuntu-Botho Investments or its subsidiaries to help it invest in some Sanlam units. Ubuntu-Botho is a black investment consortium led by South African billionaire Patrice Motsepe.

Key Insights

• The new shares will bolster Sanlam’s balance sheet after it finalized a deal to buy 53.4 percent of Morocco’s Saham Finances SA earlier this month for $1.1 billion.
• The deal will help Sanlam restore its capital reserves to between 2 billion rand and 3 billion rand, Chief Executive Officer Ian Kirk said earlier this month.
• The Saham acquisition, its biggest ever, will make Sanlam the largest insurer in Africa by geographical spread, with operations spanning 34 countries offering life, general and specialist cover. The company generates 70 percent of its operating profit from South Africa.
• The price will be determined at 10 percent discount to market price within a range of 74 rand and 86 rand. The remaining shares will go to groups focused on benefiting black women and youth, as well as South African employees, to grow direct black ownership in the company to over 18 percent.

Dig Deeper

• Sanlam will now look for growth in expanding its offering to low-income earners, Kirk said by phone.
• “We’ve done pretty well as an industry in doing funeral plans and some saving plans but we need far more comprehensive solutions for that market, including general insurance, for example,” he said.
• Sanlam also aims to increase its market share in third-party asset management, health care and life cover and employee benefits with a deeper partnership with Ubuntu-Botho. The company is acquiring a 25 percent stake in African Rainbow Capital Financial Services, a unit of Ubuntu-Botho.

Market Reaction

• Sanlam gained as much as 4.6 percent in Johannesburg on Wednesday. The stock is down about 14 percent this year.