Sanlam unveils new B-BBEE deal 

The deal is worth between R7.4 billion and R8.6 billion

Financial services group Sanlam announced on Wednesday that it was moving forward with plans to sell 5 percent of its ordinary share capital to new and existing Broad-Based Black Economic Empowerment (B-BBEE) shareholders. 

The proposed deal, which Sanlam said would broaden its base of empowerment beneficiaries, is worth between R7.4 billion and R8.6 billion. 
The subscription for Sanlam shares (111 million new ordinary shares or 5 percent) by B-BBEE shareholders will be determined at a 10 percent discount to a Sanlam share price within a range of R74 and R86.

The targeted new beneficiaries of the deal include: Sanlam employees; professional black women; rural and urban poor black women groups; black youth; black business partners; and broad-based black groups. This group will comprise 80 percent of the transaction, in which their shares will be held in what Sanlam calls a “master trust.”

The existing anchor empowerment shareholder, Ubuntu-Botho, will benefit from the remaining 20 percent. Ubuntu-Botho will take the lead and control of the process of selecting the participants and beneficiaries of the beneficiary trusts.

In a separate transaction, Sanlam is also proposing to grant a R2 billion facility to Ubuntu-Botho, which would enable “Ubuntu-Botho to invest in certain Sanlam subsidiaries.”

This would be part of Sanlam’s South African strategy to “enhance Sanlam’s empowerment at an operational (business unit) level and also to invest in financial services businesses that are complementary to Sanlam’s strategy.”

As a result of the transaction, Sanlam would be classified as a level one B-BBEE contributor and would increase direct black ownership in Sanlam to over 18 percent. Its black economic ownership, which combines direct and indirect ownership, would increase to over 35 percent.

“I firmly support the Government’s assertion that our task is to build a country driven by enterprise and innovation and to develop an economy that is diverse, resilient and prosperous. We believe the proposed transactions are well aligned to the national agenda and will build on the highly successful strategic partnership which Sanlam and Ubuntu-Botho have forged over the past 14 years. We anticipate that the economic benefits will outweigh the costs over time, creating value for shareholders and other stakeholders,” said Sanlam CEO Ian Kirk in a statement.

The issuance of new Sanlam shares will also strengthen Sanlam’s balance sheet, the company said.  The 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. 

“This will enable Sanlam to retain its balance sheet flexibility and strength, in line with its prudent balance sheet management strategy.”