Sanlam Life, a subsidiary of Africa’s leading insurance company Sanlam, has announced its intention to acquire a 25% stake in South African tycoon Patrice Motsepe’s African Rainbow Capital’s Financial Services Holdings (ARC FSH).
The deal, valued at $135 million, is part of Sanlam’s strategy to deepen its influence in the financial services sector. The move will also strengthen the company’s partnership with Motesepe’s ARC.
This acquisition will involve a combination of a cash subscription and an asset transfer. Specifically, Sanlam will pay R2.41 billion ($135 million) in cash for a stake in ARC FSH.
Additionally, the insurer will transfer its 25% interest in African Rainbow Capital Financial Services Investments (ARC FSI), valued at R1.49 billion ($83.43 million), to ARC FSH. This complex transaction is designed to consolidate ARC’s financial services investments under one entity.
Once the transaction is done, ARC FSH will become the sole owner of ARC FSI, which holds investments in various financial entities such as Tyme Bank, AI Fund, CrossFin, and Ooba.
The deal is expected to close by August 31, 2024, pending regulatory approvals. Should there be any delays, the transaction will accrue interest at the prime rate.
Notably, Sanlam has also agreed to an outperformance fee, pledging up to R70 million ($3.92 million) if ARC FSH’s investment in Tyme Investments (Asia) surpasses a predetermined target by June 2028.
What does this deal mean for Sanlam?
For Sanlam, this acquisition aligns with its strategy to expand its footprint in Africa’s financial services sector.
The insurer had previously broadened its portfolio through its 2021 investment in ARC FSI, and this latest move further solidifies its position.
According to Sanlam’s CEO Paul Hanratty, this partnership is part of a broader strategy to align with strong local partners and capitalize on emerging opportunities in the African market.
ARC’s financials and future outlook
ARC, founded in 2015 as a subsidiary of Ubuntu-Botho Investments, has been a major player in South Africa’s financial sector.
As a matter of fact, as of December 31, 2023, ARC FSH reported a profit after tax of R1.81 billion ($101.02 million) and a net asset value of R11.99 billion ($669.98 million). Once finalised, this deal will make ARC FSH the sole owner of ARC FSI, further enhancing its investment portfolio.
The transaction also provides an opportunity for potential collaboration between Tyme Bank’s digital banking services and Sanlam’s insurance products, particularly in underserved markets.
On a larger scale, this partnership could pave the way for future collaborations in fintech and other growth areas within Africa’s financial services industry.
The Sanlam-ARC deal not only strengthens both companies’ collaboration but also positions them for growth and success. The deal is expected to unlock new opportunities for both firms.
