Deal Comment: Bravura's Soria Hay on the Sanlam BEE deal

The deal can galvanise economic growth and broad-based participation, says Soria (pictured).

Heavyweight insurer, Sanlam, has spread the net of broad-based participation through multi-billion Broad-Based Black Economic Empowerment (B-BBEE) expansion.

Serendipitously coming exactly one week after the stark economic warnings outlined in the mid-term budget policy statement by finance minister Tito Mboweni, insurer Sanlam made a big announcement on Wednesday that underscores how the private sector can galvanise to drive growth and broad-based participation in South Africa.

The insurer announced a multi-billion expansion of its B-BBEE shareholding from 18 percent to 35 percent.  This will consist of a number of transactions that should strengthen its South African operations as well as situating the company’s growth strategy by the enhancement of its empowerment credentials.  Ubuntu-Botho Investments (UB), the company operated by South African billionaire Patrice Motsepe, which has a long partnership with Sanlam, will participate in a sizeable share portion.

Sanlam stated that it would issue an aggregate of five?percent of ordinary shares to a new broad-based group of empowerment shareholders and UB.   Shares to new and existing BBBEE shareholders would be issued to the tune of almost R8.6?billion.  New broad-based beneficiary groups with a focus on black women and youth, and in addition Sanlam’s South African employees, are to participate in 80?percent of the new shares to be issued, with UB participating in the remaining 20?percent.

Proceeds from the B-BBEE transaction will be used to redeem the short-term debt facilities recently raised in acquiring the remaining 53.37?percent shareholding in Morocco-based Saham Finances.  There are also plans to provide a R2 billion facility to UB to enable it to invest in some of its subsidiaries.

African Rainbow Capital Financial Services (ARC FS), one of Motsepe’s other companies, will assist in the execution of its strategy.   Thus, in addition to providing the UB facility, there is an in-principle agreement that Sanlam or a wholly-owned subsidiary of Sanlam will, subject to definitive agreements, acquire a 25?percent stake in ARC FS from African Rainbow Capital.

Soria leads the corporate finance team at Bravura Capital.

Read more on Sanlam’s deal here.