Sanlam, South Africa’s second-largest life assurer, is planning to undertake a share repurchase totaling about R4-billion as part of its major capital restructuring plans, the company said on Monday.
As part of the share repurchase, the group will offer shareholders R12 per share in a specific pro-rata offering for 10% of their shares, while undertaking a voluntary offer to shareholders holding less than 300 Sanlam shares. This will be followed by a share repurchase in the open market.
Sanlam’s share price closed on Friday at R11,52, and was last quoted on the JSE Securities Exchange (JSE) at R11,69, up 1,5% or 17 cents, in very brisk volumes of about 13,2-million shares so far on the day.
News of the share-repurchase programme follows formal approval from Sanlam shareholders to sell at least 60% of its R124-million shares (21,3% interest) in banking group Absa to British banking group Barclays.
Sanlam CEO Johan van Zyl had said at the presentation of the company’s year-end results in March this year that it would undertake a major capital restructuring exercise in 2005, part of which was likely to include a share repurchase scheme. At the time, it estimated it would have excess capital of about R6-billion.
On Monday, Sanlam said it estimates its excess capital at R7-billion, based on an extensive modelling exercise to determine its future capital requirements.
Market watchers have speculated that the remaining R3-billion is destined to be used to buy out fellow life insurer African Life (Aflife), in which Sanlam has already bought up a substantial stake in the past few months.
Aflife has been trading under a cautionary since February 14.
Sanlam said on Monday that the remaining R3-billion has been earmarked for “profitable structural growth opportunities” to support the group’s strategy of being a diversified financial-service provider.
“A number of initiatives are being investigated,” it said. “If suitable opportunities are not available to be realised within a reasonable time frame and on terms that will add value to Sanlam, the remaining excess will also be returned to shareholders.”
In the proposed offer to shareholders with less than 300 shares, Sanlam will offer a price equal to the volume weighted average market value of the shares traded on the JSE for the five business days immediately preceding September 16 2005, plus a 20-cents-per-share premium.
Sanlam will have about 650 000 shareholders falling into this category following its pro-rata offer.
The proposed schemes are subject to a number of conditions precedent, including 75% shareholder approval, as well as that of the high court. — I-Net Bridge