Sanlam Life, a subsidiary of Africa’s largest insurer, has announced plans to purchase a 25% position in African Rainbow Capital’s (ARC) Financial Services Holdings (FSH), a totally Black-owned and controlled investment company led by Africa’s first Black billionaire, Patrice Motsepe.
This $135 million transaction intends to boost Sanlam’s position in the financial services industry and develop its cooperation with ARC.
Sanlam Life will buy one-quarter of ARC FSH from African Rainbow Capital Investments for R2.41 billion ($135 million) in cash and transfer Sanlam’s 25% stake in ARC Financial Services Investments (ARC FSI) to ARC FSH for R1.49 billion ($83.43 million), according to a SENS announcement today.
ARC FSH, which has investments in Tyme Bank, AI Fund, CrossFin, and Ooba, will become the sole owner of ARC FSI following the transaction, which is slated to close on August 31, 2024, subject to regulatory approvals, with interest accumulating at the prime rate if delayed.
Sanlam has agreed to pay ARC up to R70 million ($3.92 million) in outperformance fees if ARC FSH’s investment in Tyme Investments (Asia) achieves a predetermined hurdle rate by June 2028. Prior to the transaction, ARC FSH was 50.1% owned by ARC and 49.9% by the ARC Fund.
Following the transaction, the ARC Fund’s interest will be diminished, and it will receive approximately R800 million ($44.7 million) in net cash, some of which will be used to reduce debt in ARC FSH.
ARC, managed by Patrice Motsepe, continues to look for possibilities in South Africa and Africa’s financial and diversified industries. ARC, founded in 2015 as a subsidiary of Ubuntu-Botho Investments, has a history dating back to 2004 with an emphasis on developing Black-controlled capital.
As of December 31, 2023, ARC FSH recorded an after-tax profit of R1.81 billion ($101.02 million) and a net asset value of R11.99 billion ($669.98 million). ARC FSI reported an after-tax profit of R610 million ($34.08 million) and a net asset value of R5.124 billion ($286.29 million).
Sanlam’s 2021 investment in ARC FSI expands its financial services offering. This latest acquisition demonstrates Sanlam’s commitment to expanding and strengthening its position in the financial sector. The merger will allow ARC and Sanlam to further consolidate their operations, thereby increasing their competitive advantage.
