Patrice Motsepe will continue his ascent up the South African corporate ladder when a consortium he leads, Buntu Botho Investments Limited, completes its purchase of a 10% stake in financial services giant Sanlam in a deal worth R2,2-billion, subject to shareholder approval. The details of the transaction were disclosed by Sanlam last Thursday when the group announced its results until the end of last year.
Buntu Botho is controlled by Motsepe’s Sizanani, which holds 55% of the consortium. Twenty-five percent is held by a broad-based empowerment group comprising church, women and youth groups. The remaining 20% is held by the Community Development Trust. Details of whom the latter groups represent or who leads them were unavailable.
Motsepe, who was abroad at the time of the announcement, chairs Harmony Gold Mine and Anglovaal Mining through African Rainbow Minerals. According to empowerment-rating agency Empowerdex, he is the 13th most influential black director on the JSE Securities Exchange, controlling market capitalisation of R56-billion through three non-executive directorships. That figure includes a board membership of Sanlam.
In a detailed circular to shareholders, Sanlam notes that for Motsepe and Buntu Botho the transaction helps them “contribute to the strengthening of Sanlam’s position as a leading financial services institution” by helping “facilitate broad-based empowerment”. The deal will “help Sanlam provide financial services to the new emerging market in South Africa”.
The transaction will be undertaken by the issuing of a total of 226-million ordinary shares in three different classes of preference. The classes carry varying rights with some, for instance, not being listed and paying no dividend. There are a further 56-million deferred Sanlam shares that are optionally convertible to ordinary shares, bringing the total of shares offered to 282-million.
For its part, Sizanani will subscribe for 113-million Sanlam shares for R865-million and pay R514-million plus its own shares. It will issue, in total, 150-million shares, also in three preference classes. The 226-million and the 282-million shares represent between 8% and 10% of Sanlam’s issued share capital of 2,7-billion shares. By Thursday, midday, Sanlam’s market capitalisation stood at R26,7-billion. Ten percent of this is R2,6-billion.
With its results, Sanlam demonstrated the short-term sacrifice to be made by anyone entering an empowerment deal. The result of this transaction is to dilute headline earnings per share by 3,2% and the embedded value of each ordinary share by 3,5%.
This is partly because of a one-off donation to the Community Development Trust, but also because, in preparation for the transaction, Sanlam issued 174-million new shares.
In recommending that its shareholders approve the transaction, the Sanlam board emphasised its long-term benefits. In its results Sanlam announced a 16% rise in headline earnings per share to 100,2 cents and a net inflow of funds of R5-billion
— an improvement from a R4-billion net outflow.