| Wed 8 Dec 2010, 14:55 | | SNT - Santam Limited - Acquisition of Sanlam life insurance limited`s 68.75% |
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SNT
SNT
SNT - Santam Limited - Acquisition of Sanlam life insurance limited`s 68.75%
interest in the issued ordinary shares of Miway Group Holdings (PROPRIETARY)
LIMITED
SANTAM LIMITED
Incorporated in the Republic of South Africa)
Registration number: 1918/001680/06)
Share Code: SNT ISIN: ZAE000093779)
("Santam")
ACQUISITION OF SANLAM LIFE INSURANCE LIMITED`S 68.75% INTEREST IN THE ISSUED
ORDINARY SHARES OF MIWAY GROUP HOLDINGS (PROPRIETARY) LIMITED
1. INTRODUCTION
Swanvest 120 (Pty) Ltd ("Swanvest"), a wholly owned subsidiary of Santam, has
entered into an agreement with inter alia Sanlam Life Insurance Limited ("Sanlam
Life"), a wholly owned subsidiary of Sanlam Limited ("Sanlam"), in terms of
which Swanvest will acquire Sanlam Life`s 68.75% interest in the issued ordinary
shares of MiWay Group Holdings (Pty) Ltd ("MiWay"), Sanlam Life`s claims against
MiWay as well as preference shares in Misty Sea Trading 267 (Proprietary)
Limited ("Misty Sea") held by Sanlam Life, with effect from 1 January 2011 ("the
acquisition").
Swanvest currently owns 31.25% of the issued ordinary shares in MiWay. Following
the acquisition, Swanvest will own 100% of MiWay`s issued ordinary shares. The
acquisition remains subject to the fulfilment (or waiver, where applicable) of
certain suspensive conditions as set out below.
2. THE BUSINESS OF MIWAY
MiWay, through its wholly owned subsidiary MiWay Insurance Limited, is an
authorised financial services provider and registered short-term insurer that
offers a range of financial products and services directly to the consumer.
MiWay`s initial offering comprises short-term insurance, motor warranty and
credit life, and there are long term plans to extend this offering to a
comprehensive array of financial services.
MiWay will continue to conduct its business as a separate subsidiary of Santam
with its own licence, brand, management, staff, IT systems, rating model and
underwriting rules. Sanlam will retain access to the MiWay structures to
distribute other financial services products.
3. RATIONALE
The acquisition follows the ratification today by Sanlam of its decision to
restructure and consolidate its South African short-term insurance business
interests under Santam, by selling its 68.75% interest in the issued ordinary
shares of MiWay to Santam. This decision enables the Sanlam Group to improve the
coordination of its short-term insurance coverage across all consumer market
segments and enables Santam to enhance its overall leadership position in the
short-term insurance market. Santam believes that the acquisition will be value
enhancing to shareholders by enabling Santam to profitably grow its market
share, and by increasing its presence in the growing direct short-term insurance
market.
4. THE TRANSACTION
4.1 Consideration
The consideration payable by Swanvest to Sanlam Life in respect of the
acquisition is R240 million, being the cost of Sanlam`s investment in MiWay to
date, payable in cash with effect from 1 January 2011, plus a deferred purchase
consideration payable in cash with effect from 31 December 2013 based on the
increase in the real value of MiWay from 1 January 2011 to 31 December 2013.
Santam will finance the acquisition out of available resources.
4.2 Suspensive conditions
The acquisition remains conditional upon the fulfilment of inter alia the
suspensive condition that the approval required for the acquisition in terms of
the Short-Term Insurance Act is unconditionally granted, or granted subject to
such condition(s) as Swanvest may in writing approve.
4.3 Financial effects
The unaudited pro forma financial effects set out below have been prepared for
illustrative purposes only to assist Santam shareholders in assessing the impact
of the acquisition on the earnings per share ("EPS"), headline earnings per
share ("HEPS"), net asset value per share ("NAV") and net tangible asset value
per share ("NTAV") of Santam. The unaudited pro forma financial effects have
been prepared for the six months ended 30 June 2010 and are based on unaudited
figures for this period. These unaudited pro forma financial effects have been
disclosed in terms of JSE Limited ("JSE") Listings Requirements and because of
their nature may not fairly present Santam`s results and financial position
after the acquisition. The unaudited pro forma EPS and HEPS figures only reflect
MiWay`s historical performance prior to the acquisition, with no bearing on its
future performance. The unaudited pro forma financial effects are the
responsibility of the directors of Santam and are provided for illustrative
purposes only.
Before the After the % Change
acquisition acquisition
EPS (cents) 512 548 7.1%
HEPS (cents) 511 467 (8.5%)
NAV (cents) 4,440 4,519 1.8%
NTAV (cents) 4,224 3,921 (7.2%)
Number of shares in issue 113.0 113.0 -
(millions)
Weighted average number of shares 112.9 112.9 -
in issue (millions)
The unaudited pro forma financial effects are based on Santam`s interim results
for the six months ended 30 June 2010, assuming that:
* for purposes of calculating EPS and HEPS, the acquisition was effective on
1 January 2010;
* for purposes of calculating NAV and NTAV, the acquisition was effective on
30 June 2010;
* notional interest at an after tax rate of 6% per annum on the cash purchase
consideration has been forfeited;
* estimated non-recurring transaction costs of R1 million after tax were
incurred;
* a gain of R90 million was recognised in earnings (but not in headline
earnings) on the deemed disposal of the investment in associate (being
Swanvest`s current 31,25% holding in MiWay), in terms of the accounting
treatment for Business Combinations, IFRS 3; and
* MiWay`s losses for the six months ended 30 June 2010 were consolidated and
its equity accounted losses for the period were reversed.
5. SMALL RELATED PARTY TRANSACTION
Sanlam is the controlling shareholder of Santam and is therefore a related party
of Santam. PricewaterhouseCoopers Corporate Finance (Proprietary) Limited, as
the independent professional expert, has confirmed to Santam`s board of
directors that the terms and conditions of the acquisition are fair to Santam`s
shareholders. Santam will confirm to shareholders on SENS once the JSE has
approved the fairness opinion.
CAPE TOWN
8 December 2010
Sponsor: Investec Bank Limited
Date: 08/12/2010 14:55:01 Produced by the JSE SENS Department.
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