| Fri 3 Nov 2023, 8:00 | | CLIENTÈLE LIMITED - Terms announcement regarding the acquisition of 1Life Insurance Limited and withdrawal of cautionary announcement |
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Terms announcement regarding the acquisition of 1Life Insurance Limited and withdrawal of cautionary announcement
CLIENTÈLE LIMITED
Incorporated in the Republic of South Africa
(Registration number: 2007/023806/06)
Share code: CLI
ISIN: ZAE000117438
("Clientèle" or "the Company")
TERMS ANNOUNCEMENT REGARDING THE ACQUISITION OF 1LIFE INSURANCE
LIMITED AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Shareholders are referred to the various cautionary announcements released on SENS,
the last of which was dated 24 October 2023 and are hereby advised that the Company
has entered into an exchange of shares agreement ("Share Exchange Agreement") with
Telesure Investment Holdings Proprietary Limited ("TIH"), in terms of which the Company
will acquire 100% of the issued share capital of 1Life Insurance Limited ("1Life") held by
TIH for a purchase consideration that will be settled through an issue of shares in
Clientelè, as set out in paragraph 4 below ("1Life Acquisition").
2. THE BUSINESS OF 1LIFE
1Life is a licensed life insurer that specialises in offering funeral and underwritten life
insurance products to South African consumers via direct sales, intermediated sales and
through online distribution platforms.
3. RATIONALE FOR THE 1LIFE ACQUISITION
Clientèle is a diversified financial services group and is one of South Africa's leading direct
distributors of financial services products. Over the past 30 years it has been successfully
offering convenient and easy to understand financial services products to the entry level
mass market.
1Life operates in the underwritten direct and intermediated life insurance market and the
funeral mass market. When 1Life commenced operations in 2006, it was the first truly
direct life insurer, having been the largest direct life insurer for over a decade, the
company has evolved into a multi-distribution insurer in the entry level mass market and
mass affluent market.
The merging of these two well-known insurance entities brings together two organisations
that have expertise in the mass market segment and a strong focus on Treating Clients
Well. The acquisition is accretive, resulting in a combined Embedded Value of
approximately R7.8 billion and almost 1.5 million contracts, which improves scale and will
enhance future value creation for all customers, employees, shareholders and other
stakeholders.
4. CONSIDERATION
The purchase consideration for the 1Life Acquisition is an amount of R1,914 billion, which
is equivalent to the Embedded Value of 1Life, as at 30 June 2023, adjusted to be
calculated on a similar basis to that used by Clientèle in its Embedded Value calculation,
plus a control premium of 6.23%.
The purchase consideration will be settled through the issue of 117,815,756 (one hundred
and seventeen million, eight hundred and fifteen thousand, seven hundred and fifty six)
ordinary shares in Clientèle ("Consideration Shares"), which will be equal to 26% of the
sum of Clientèle's issued share capital plus the Consideration Shares as at the date of
this announcement.
The Consideration Shares will be issued at a price of R16.25 (sixteen Rand and twenty
five cents) per Consideration Share, which, although a substantial premium to the
prevailing market price of Clientèle shares, is similar to Clientèle's Embedded Value per
share, given that the purchase consideration was determined on a like-for-like basis as
set out above.
5. EFFECTIVE DATE OF THE 1LIFE ACQUISITION
The effective date of the 1Life Acquisition will be the 3rd business day after the date on
which all of the conditions precedent, as set out below, have been fulfilled or waived
("Closing Date"), which date is anticipated to be 30 June 2024.
6. CONDITIONS PRECEDENT
The 1Life Acquisition is subject to the fulfilment or waiver (if applicable), as the case may
be, of the following material conditions precedent ("Conditions Precedent"):
- by not later than 17h00 on 31 March 2024, the shareholders of Clientèle have
passed a resolution (1) approving the 1Life Acquisition in terms of the relevant and
applicable provisions of the JSE Listings Requirements, (2) electing two persons
(nominated by TIH) to the board of directors of Clientèle, with effect from the Closing
Date and (3) approving the allotment and issue of the Consideration Shares
pursuant to the Share Exchange Agreement, to the satisfaction of TIH;
- by not later than 17h00 on 30 September 2024, the counterparties to the material
contracts, as defined in the Share Exchange Agreement, have been notified in
writing or have consented in writing to the change in control of 1Life;
- by not later than 17h00 on 31 March 2024, the signature of an amendment
agreement to the written Outsource Agreement ("TGS OA") concluded between
Telesure Group Services Proprietary Limited ("TGS") and 1Life on or about
September 2019 in terms of which inter alia for a period of 5 (five) calendar years
from the Closing Date, TGS will continue to render outsourced services to Clientèle
and such agreement having become unconditional, save for any condition
precedent in such agreement requiring the Share Exchange Agreement to become
unconditional;
- by not later than 17h00 on 31 March 2024, TIH, 1Life and Clientèle (or its subsidiary,
Clientèle Life Assurance Company Limited) have concluded a written agreement in
relation to a royalty free right to copy and/or extract all software code related to
information technology systems exclusively utilised by 1Life and/or that are bespoke
to 1Life or any of its products, and which are owned by TIH or any of the TIH group
companies and hosted on its information technology main frame(s), for its own use
at any time after the Closing Date, including any maintenance agreements attaching
to such software as may be required by 1Life to secure access to the resources that
it requires to continue to conduct the 1Life business on the same basis as before
the 1Life Acquisition, and where such copy or extraction is not possible, a licensing
arrangement to achieve the same outcome;
- by not later than 17h00 on 31 March 2024, the signature of an agreement in terms
of which Clientèle and/or 1Life will pay to TIH or TGS certain reasonable costs
based on the sales of 1Life policies by TIH tied agents, and such agreement having
become unconditional, save for any condition precedent in such agreement
requiring the Share Exchange Agreement to become unconditional;
- by not later than 17h00 on 31 March 2024, the signature of lock-in agreements with
certain key employees, and such agreements having become unconditional, save
for any condition precedent in such agreement requiring the Share Exchange
Agreement to become unconditional;
- by not later than 17h00 on 31 March 2024, the signature of a written leads
agreement between TIH, 1Life and Clientèle (or its subsidiary, Clientèle Life
Assurance Company Limited) which will include –
o a royalty free intellectual property licence in respect of the use of TIH's
owned brand trademarks which are used by 1Life as at the signature date
of the Share Exchange Agreement in the conduct of the 1Life business for
the purpose of (i) cross-selling to customers, 1Life's white labelled
products; and (ii) servicing the existing clients of 1Life's white labelled
products;
o a royalty free right to information in terms of which TIH grants to 1Life, the
right to receive certain information of the customers of TIH's group
companies (to the extent legally permissible), and which information has
been generated from time to time by TIH's internal systems and
processes, for purposes of 1Life marketing and selling its life insurance
products to such customers through its direct call centres and TIH's tied
agency force; and
o an agreement in terms of which Clientèle and the TIH group companies
provide each other with certain customer leads information of potential
customers of insurance products or value-added services (to the extent
legally permissible) in relation to which the respective referring parties do
not hold a licence to underwrite, for the purposes of marketing and selling
such products or services (under its own brands or as white-labelled
product offerings);
and such agreement having become unconditional, save for any condition
precedent in such agreement requiring the Share Exchange Agreement to become
unconditional
- by not later than 17h00 on 30 September 2024, the 1Life Acquisition and all
agreements and transactions contemplated in the Share Exchange Agreement (to
the extent necessary) have been unconditionally approved by the relevant
competition authorities in terms of the Competition Act, no 71 of 2008, or
conditionally approved on terms and conditions which each of Clientèle and TIH
confirms in writing to the other to be acceptable to it;
- by not later than 17h00 on 30 September 2024 (1) Clientèle has signed and
delivered to the Prudential Authority, a written letter of credit in relation to 1Life in
replacement of the current letter of credit provided by TIH to the Prudential Authority
in respect of 1Life and (2) the 1Life Acquisition and all agreements and transactions
contemplated in the Share Exchange Agreement (to the extent necessary) have
been unconditionally approved by the Prudential Authority in terms of section 51(1)
of the Insurance Act read with sections 157 and 158 of the FSRA, or conditionally
approved on terms and conditions which each of Clientèle and TIH confirms in
writing to the other to be acceptable to it; and
- by not later than 17h00 on 30 September 2024, Clientèle has obtained all such
approvals as may be required, if any, by the JSE Limited ("JSE") for the allotment,
issue and listing of the Consideration Shares on the JSE.
The time period for the fulfilment of the Conditions Precedent can be extended in the
manner set out in the Share Exchange Agreement.
7. SIGNIFICANT TERMS OF THE SHARE EXCHANGE AGREEMENT
Distributions
The shares in 1Life are being acquired ex of certain dividend(s) specified in the Share
Exchange Agreement.
Clientèle may not declare or pay any dividends prior to the Closing Date which is not in
the ordinary course of business or which constitute a distribution in specie or a
capitalisation issue. The Consideration Shares are being issued to TIH ex any dividend
that may be declared by Clientèle and with a record date prior to the Closing Date.
Restraint
In terms of the Share Exchange Agreement TIH has undertaken (for itself and on behalf
of each of its group companies) that it will not, and will ensure that its related parties do
not, for a period of 5 (five) calendar years from the Closing Date, directly or indirectly,
offer, distribute and/or underwrite any insurance product(s) that compete with 1Life's
insurance products, underwritten as at the Closing Date, without the prior written consent
of Clientèle.
Warranties and indemnities
The Share Exchange Agreement contains warranties and indemnities appropriate for
transactions of this nature.
8. FINANCIAL INFORMATION
In terms of the latest audited annual financial statements of 1Life, for the financial year
ended 30 June 2023, the net asset value of 1Life amounted to R1,705,425,000, while the
profit after taxation of 1Life amounted to R152,756,000 for the year ended 30 June 2023.
9. CLASSIFICATION OF THE 1LIFE ACQUISITION
The 1Life Acquisition constitutes a category 1 transaction in terms of the JSE Listings
Requirements which will require the approval of shareholders. In the circumstances of the
1Life Acquisition only, the material shareholders of Clientèle, namely Newshelf 702 (Pty)
Limited, River Lily Investments (Pty) Limited and the Hollard Group, holding between them
approximately 80% of the issued share capital of Clientèle, have voluntarily decided that
they will not vote on the resolution to approve the 1Life Acquisition at the meeting to be
convened to consider the 1Life Acquisition.
A circular to shareholders relating to the 1Life Acquisition will be distributed in due course.
10. OTHER
For purposes of paragraph 9.16 of the Listings Requirements, the Company shall ensure
that after the Closing Date nothing in the constitutional documents of 1Life will, in any
way, frustrate or relieve the Company from its compliance with the Listings Requirements.
11. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are advised that, as a result of the publication of this terms announcement,
the cautionary announcement published on 15 June 2023 and renewed on 28 July 2023,
11 September 2023 and 24 October 2023, is hereby withdrawn and shareholders are no
longer required to exercise caution when dealing in the Company's securities in relation
to the 1Life Acquisition.
Johannesburg
3 November 2023
Transaction sponsor
Valeo Capital (Pty) Limited
Legal advisors
Cliffe Dekker Hofmeyr Incorporated
Date: 03-11-2023 08:00:00
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