Innovative and transformational deal secures dual local and global buy in

Mar 14, 2019

| Black Economic Empowerment |

In a structure requiring no equity injection from the participating shareholders, Standard Bank acted as sole financial advisor, transaction sponsor and funder to Sanlam on its transformational B-BBEE transaction announced on 31 October 2018 and completed in March 2019.

The transaction, which positions Sanlam’s South African operations for growth, also showcases Standard Bank’s proven ability to partner with clients to deliver complex and bespoke transactions.  In addition, “this landmark transaction strengthens Sanlam’s position as one of the first major South African insurers to achieve a Level 1 B-BBEE scorecard rating in accordance with the updated Financial Services Charter,” says Bill Blackie, Head, Investment Banking for Standard Bank Group. 

While the transaction was jointly funded by Sanlam and Standard Bank, Standard Bank facilitated the funding off its balance sheet, “via a combination of preference shares and secured equity funding, optimising the funding mix for the subscription of newly issued Sanlam shares by the B-BBEE investment vehicle,” says Mr Blackie.  

While the requirements and benefits of a B-BBEE transaction are well understood by South African shareholders, Sanlam also has a significant international shareholder base, concentrated primarily in the United States, the United Kingdom and Europe. As such, positioning the merits of the transaction and its importance in supporting the growth of Sanlam’s business in South Africa was key to securing the requisite 75% shareholder approval.  

In light of the long lead time between announcement and closing of the transaction, as well as the fact that the economics in relation to the share issuance portion remained exposed to market risk, the issue price of the equity was purposefully structured to permit a share subscription, “within a defined price range, rather than at a fixed price,” says Mr Blackie. This flexibility optimised the economic impact of the transaction for both Sanlam’s existing shareholders as well as the new B-BBEE shareholders. 

Sanlam required “a bank with a strong understanding of the South African landscape complemented with the global corporate broking reach required to explain the transaction to international shareholders as an essential pre-requisite for the growth of Sanlam’s business in South Africa,” said Sanlam FD, Heinie Werth.  “Standard Bank’s unique combination of local balance sheet; a wide African footprint; strong advisory capabilities and global reach, and most of all, a professional and passionate team with exceptional work ethic, allowed us to appoint them as sole advisor and funder,” Mr Werth added.

Standard Bank’s relationship with Sanlam and deep understanding of their business, combined with its balance sheet strength and capabilities ensured a successful and seamless execution.

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