Sanlam to sell $583 million stake to black investors, staff
South Africa's biggest insurer Sanlam Ltd announced a series of deals on Wednesday to meet so-called affirmative action rules, including the sale of a 5% stake to black investors and staff for up to R8.6 billion ($583 million).
Companies in South Africa have to meet quotas on black ownership, employment and procurement as part of a government drive called black economic empowerment, or BEE, to address inequalities still prevalent years after the end of apartheid.
The plan aims to shift more of the mostly white-controlled wealth to the black majority. Companies with strong BEE credentials are more likely to win government contracts.
The transaction, which will raise the direct shareholding by black investors in Sanlam to 18%, will be priced at a 10% discount to the company's share price within a range of R86 ($6) or R74($5), it said. Proceeds will pay off a loan used to buy a Moroccan insurer.
The shares will be issued to Sanlam's long-standing partner Ubuntu-Botho, an investment house whose owners include black women, youth and South African black tycoon, Patrice Motsepe.
Sanlam's staff, both black and white, who is not the beneficiaries of existing share schemes will also, be offered the new shares. A loan to finance the deal will be provided 50:50 by Sanlam and Standard Bank, the insurer said. At 1030 GMT, Sanlam's shares were up 3.7% at R74.58 ($5).
The BEE drive has met some opposition. The mainly white Solidarity union, for example, criticised petrochemical giant Sasol for its share scheme. Sanlam said it would also lend Ubuntu-Botho R2 billion($140 million) to invest in Sanlam's business units.
Ubuntu-Botho's African Rainbow Financial Services unit will use some of the money to buy 25% of the insurer's asset management arm and will launch a separate black-managed insurance firm together with Sanlam's life insurance arm. The deals may help to address calls from some of Sanlam’s institutional investors, particularly state-owned ones, for more diversity in the insurer's business units.
"The thing that caught my attention is the participation of employees, but I would have liked to see it being broadened outa little to include policy holders and general public," said Bright Khumalo, a fund manager at Vestact.
Sanlam was founded 100 years ago to help Afrikaners, white South Africans of mainly Dutch descent, who were impoverished by their defeat in the Anglo-Boer War. The firm has grown into one of Africa's biggest financial services company, with operations in more than 33 countries.