Sanlam may put Barclays bid to shareholder test
October 5, 2004
By Sherilee Bridge
Johannesburg - Sanlam, the country`s second-biggest life assurer, might ask its shareholders to decide on Barclays`s proposed offer for its 21.33 percent of Absa.
The assurer, which is not party to the Barclays-Absa negotiations on the takeover terms, believed the deal might be big enough to put to shareholders.
Selling the stake, 18.9 percentage points of which is held through shareholders` funds and the rest by policyholders` funds, would reduce Sanlam`s over-reliance on its investment in Absa and should improve its capital efficiency, and hence its return on equity.
Sanlam chief executive Johan van Zyl said at Sanlam`s interim results presentation last month that it would consider introducing gearing to fund structural growth, share repurchases and reducing its exposure to Santam, the short-term insurer of which it holds 53.3 percent, to achieve its goal.
Sanlam`s Absa stake was estimated at R8.5 billion just over a week ago.
While Sanlam has not revealed what price it would be looking for, market evaluations have pegged the Absa offer at between R70 and R80 a share at best. Sanlam financial director Flip Rademeyer said last week that price and business considerations would be taken into account when considering the offer. On the business side, the insurer said it hoped to maintain its bancassurance relationship with Absa.
Bancassurance is the marketing of life and non-life products to a bank client base and banking products to an insurance client base.
Sanlam and Absa established a bancassurance channel through a co-operation agreement after Sanlam decided against a full-blown merger with Absa in late 2002.
Absa has suggested that there would be few changes at the bank if Barclays took a majority stake.
Barclays, which has a presence in 12 African countries, has a reputation for allowing locals to run its banks. Absa reported a 36.1 percent rise to R1.24 billion in insurance-related income in the year to March 2004.
The bank`s 33 percent rise in net income to R4.5 billion for the year helped buoy Sanlam`s first-half profit, which was 15 percent higher at R1.6 billion in the period to June.
Shares in Sanlam fell 21c to R10.59 on the JSE yesterday. Absa shares fell 70c to R63.80. The life assurance sector declined 0.47 percent and the banks sector 0.39 percent.
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