The proposed deal will, at the least, leave Sanlam holding 55% of AfroCentric and no more than 60%. Picture: Karen Sandison/African News Agency(ANA)
AfroCentric Investment Corporation’s share price leapt a massive 25% yesterday morning to R5.24 after Sanlam made an offer to acquire control at R6 a share.
The majority black-owned company’s board said they had received an offer from Sanlam to acquire no less than 36.9% and up to 43.9% of AfroCentric’s share capital.
The proposed deal will, at the least, leave Sanlam holding 55% of AfroCentric and no more than 60%. AfroCentric delivers affordable medical aid, health insurance and administration services.
AfroCentric CEO Ahmed Banderker said although the transaction was still subject to shareholder and regulatory approvals, he was “encouraged” by the offer and believed it signalled a positive move forward for AfroCentric.
“Sanlam will be able to integrate AfroCentric’s product offering into its ecosystem, while AfroCentric will gain increased access to the wider Sanlam distribution network. AfroCentric’s client base will also benefit from access to the overall Sanlam product offerings and vice versa,” Bandeker said
Sanlam Group CEO Paul Hanratty said in a statement that AfroCentric had an, “unwavering focus on providing excellent service at affordable price points to South African consumers, which made it an attractive addition to Sanlam’s offerings”.
“Affordable and reliable healthcare is an important need for consumers. Sanlam intends to expand its client proposition to provide a more holistic product offering, including medical aid, health insurance and administration,” Afrocentric’s board said.
Sanlam has a large presence in the employee benefits market and by offering health insurance and administration alongside its other benefits, it hopes to create a simpler and more convenient solution for employers.
Sanlam said it believed in the long-term growth potential of AfroCentric and the businesses’ combined abilities to deliver a differentiated proposition in the healthcare sector.
“This will be done through developing bespoke healthcare solutions and enhanced commercial visibility through increased marketing and Sanlam co-branding at the administrator level,” Sanlam said.
It added that further investment from Sanlam in AfroCentric would enable integration of AfroCentric into the ecosystem of the Sanlam Group, Afrocentric would gain increased access to the wider Sanlam Group distribution network and AfroCentric’s client base would also benefit from access to the overall Sanlam product offering.
The partial offer would also allow AfroCentric’s shareholders to also partially liquidate their otherwise illiquid Afrocentric Shares at a premium to the volume average traded price.
One of the conditions of the deal are that AfroCentric shareholders approve the issue by AfroCentric to Sanlam Life, of 231.34 million new shares in AfroCentric, which will constitute about 28.7% of the issued shares in AfroCentric, and which will be issued in exchange for the disposal by Sanlam Life to AfroCentric of all the shares held by Sanlam Life, in ACT Healthcare Assets (AHA). Sanlam Life currently holds 28.7% of AHA.
ACT Healthcare Assets controls AfroCentric entities including the Medscheme medical scheme administration business and pharma businesses Pharmacy Direct and Activo.
Sanlam said the AfroCentric shares would remain listed on the JSE following implementation of the transaction.
Meanwhile, Sanlam's share price slid more than 4% yesterday afternoon to R48.15.
Gryphon Asset Management portfolio manager Casparus Treurnicht said the decline was not likely to due to AfroCentric acquisition, because of the relatively small size of AfroCentric.
This was in spite of the fact that there may be competition regulatory issues on the deal given the size of Medscheme, and that the acquisition may further consolidate the medical schemes market.
He said Sanlam's share price decline was more likely part of a general downward trend in most of the large insurers recently, due to the Competition Commission investigation into the industry.
The insurance industry was highly regulated so collusion was going to be hard to prove, but the market did not like the uncertainty, Treurnicht said.
BUSINESS REPORT