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Sanlam Limited - Sanlam acquires a majority interest in Channel Life
Sanlam Limited
(Registration Number 1959/001562/06)
JSE share code: SLM
ISIN number: ZAE000028262
NSX share code: SLA
SANLAM ACQUIRES A MAJORITY INTEREST IN CHANNEL LIFE
Sanlam announced today that it has concluded an agreement to acquire a majority
interest (50% plus one share) in Channel Life (Channel), a niche life insurance
business focused on the entry-level market (ELM) in South Africa. Sanlam will
purchase its majority stake from current majority shareholder PSG Group and
empowerment partner, Arch Equity. PSG will retain 35% of Channel and Arch Equity
will remain an indirect shareholder in Channel Life via its shareholding in the
PSG Group.
The remainder of the shares are held by management and other minorities. A
value of R230 million has been put on Channel for purposes of the transaction.
Sanlam will fund its investment of about R116,5 million by means of cash and in
two tranches. The first tranche of R106,2 million, will be paid on finalisation
of the transaction and the second tranche, R10,3 million, after 31 July 2006,
subject to the value of new business generated by Channel Life for the period 1
August 2005 to 31 July 2006 being above certain agreed thresholds.
The agreement is subject to the fulfilment of certain suspensive conditions that
relate mainly to obtaining regulatory approvals by 31 October 2005 as well as
the approval of the SRP.
Sanlam has identified Channel as a rapidly growing player in the life insurance
field, with a strong focus on the ELM. Channel offers Sanlam complementary ELM
distribution through its direct marketing methods and skills, a strong and
experienced management team and access to an enhanced product range such as
credit life insurance.
In terms of the proposed transaction:
*Channel will retain its own brand, market positioning and operational
independence.
*Sanlam will reverse its 55% interest in Safrican into Channel. CEO of Safrican,
Nthabiseng Mmatli, will remain in that position.
*Channel products will be sold through the Sanlam distribution network.
Commenting on the transaction, Dr Johan van Zyl, Group Chief Executive of Sanlam
said:
`Sanlam has identified the entry-level life insurance market as an important
component of its growth strategy. This transaction complements our acquisition
of African Life through the addition of direct marketing skills and credit life
insurance products.
`Our majority interest in Channel provides Sanlam with a meaningful presence
from which to accelerate our existing offering in this segment. Sanlam plans to
follow a multiple client-facing and branding strategy within the ELM insurance
business in order to grow more rapidly, specifically in direct marketing
channels, credit life offerings and bancassurance arrangements.
`Safrican will be reversed into Channel to provide Safrican with improved access
to ELM distribution opportunities and excellent management. Channel`s business
has the potential to generate good results in new business growth and recurring
premiums.`
Mr Jannie Mouton, Chairman of the PSG Group says that the transaction comes at a
right time for all parties.
`Channel Life has reached the stage where it requires a shareholder of
reference, able to continue funding its growth and unlocking further synergies.
We are looking forward to working with Sanlam as our new partner, and retaining
a significant interest in Channel.`
Mr Rene Otto, CEO of Channel Life, said:
`Channel has (through its efforts to `Africanise` the entry level of the South
African insurance market) secured a successful niche for itself and is offering
affordable and appropriate products to the ELM. Channel`s direct marketing
methods and skills are complementary to Sanlam`s and we envisage an effective
mutual utilisation of distribution methodologies in the future. Channel`s focus
on growth is aimed at expanding its retail recurring premiums through a multi-
channel distribution strategy including inbound and outbound telesales, setting
up a national broker distribution arm and creating a referral marketing
division.
`I am looking forward to working with Nthabiseng Mmatli of Safrican and will
rely on her in the implementation of our new initiatives.
`In addition, Sanlam`s majority shareholding will lend further credibility to
our business and we expect Channel to continue to benefit from PSG`s
entrepreneurial influence. The plan to list Channel on the JSE by the end of
2007 is set to continue, unless one of the shareholders buy out the others
before then,` Otto said.
Channel`s recently announced private trading of shares `over the counter` will
continue, although it is expected that stock may become difficult to accumulate
following the transaction with Sanlam.
Notes:
More details on the suspensive conditions are available in the joint SENS
announcement of PSG Group and Arch Equity Limited.
About Channel Life
Channel is a non-listed public company. Its main business is underwriting life
insurance products with a focus on the entry-level market sector of the South
African population. It also markets niche investment-related products to the
affluent market and group-based products to the corporate market.
At 28 February 2005 it had an asset base of R2 096 million and generated
headline earning of R39,0 million for the financial year then ended.
Channel`s key objectives leading up to 2007 are to:
*be regarded as a top six life office measured by total assets;
*grow total assets to over R10 billion;
*double its 2004 embedded value (`EV`) to R300 million;
*achieve headline earnings of R50 million, and
*list on the JSE by the end of 2007
Following this announcement, Channel`s shareholders will be Sanlam (50% plus one
share), PSG Group (35%) and the remainder shares held by management and other
investors
About Safrican
Sanlam Life acquired 55% of Safrican, Thebe`s life insurance company focusing on
life, funeral and credit life insurance, in 2004.
Safrican is one of the oldest, most established brands in the entry-level market
segment, with over R240 million annual premiums, almost two million insured
members and 600 brokers. Safrican also has a distribution agreement with the
South African Post Bank until the end of 2006.
11 August 2005
Sponsor:
JP Morgan Equities Limited
Date: 11/08/2005 04:04:06 PM
Produced by the JSE SENS Department
