Sanlam Looks for More African Deals After $1.1B Investment in Morocco’s Saham

By Vernon Wessels and Souhail Karam | March 8, 2018

Fresh from sealing its biggest ever deal, Sanlam Ltd. is still scouring Africa for more acquisitions to extend its lead as the continent’s largest financial-services company outside of banking.

The Cape Town-based insurer will spend $1.1 billion to take full control of Morocco’s Saham Finances SA, bringing its total investment in the firm to almost $1.7 billion since February 2016. The deal will give Sanlam access to Saham’s 26 markets across North Africa, the Middle East and West Africa and builds on its business that spans 11 African countries, India and Malaysia.

The insurer is looking for “bolt-on” acquisitions that will ensure its business are “number one, two or three” in the markets in which they operate, including Ghana, Sanlam emerging-market head Junior John Ngulube said in an interview. It is in talks on a partnership in Ethiopia, which it hopes to convert to an equity investment once the country opens its insurance industry to foreign investors, and investigating how it can enter Egypt, he said.

Flush with excess cash, Sanlam has been on an acquisition spree across emerging markets and Africa at a time when its main African rival, London-based Old Mutual Plc, is splitting up its businesses after expanding mainly into developed markets. Sanlam has made at least five acquisitions since the start of 2017, with deals in South Africa, Zimbabwe, Kenya, Uganda and London.


“We believe in the African growth story, we’re up and running, we’re doing it,” Sanlam Chief Executive Officer Ian Kirk said on a webcast Thursday. The Saham deal “positions Sanlam as the ‘go -to’ financial services provider for multinationals, brokers, banks, other distribution entities, as well as a preferred network of partners for international insurers with no African footprint.”

Sanlam’s shares rose 0.2 percent to 95.14 rand by 2 p.m. in Johannesburg. The stock has returned 39 percent over the past 12 months, the best performer in the six-member FTSE/JSE Africa Assurance Index after Discovery Ltd.

Saham Assurance has gained about 47 percent over the same period for a market value of 7.3 billion dirham ($800 million). Sanlam doesn’t intend to delist Saham Assurance Morocco and will keep its stake of 58 percent in the company, Ngulube said.

The purchase of the remaining 53.4 percent of Saham Finances that Sanlam doesn’t already own will also improve its presence in Portuguese-speaking southern African countries where growth has been more than 10 percent, Saham Finances CEO Nadia Fettah told reporters in Casablanca.

Santam Partnership

Saham Finances, a Casablanca-based arm of the Saham Group founded by Moulay Hafid Elalamy in 1995, is the largest insurer on the continent outside of South Africa. Sanlam, which owns 60 percent of property and casualty insurer Santam, is expanding to boost profit as its home economy struggles to emerge from a slowdown last year.

Sanlam hedged $602 million of the foreign-exchange exposure related to the deal at 14.12 rand per dollar in December, Finance Director Heinie Werth said. While the hedges push up the cost of the transaction in rand, they were made while South Africa was facing political uncertainty over the future of former President Jacob Zuma, whose scandal-ridden administration was last month replaced by Cyril Ramaphosa, who is seen as more business friendly.

It is an “expensive payment” at a historical price-to-earnings ratio of 26 times and 2.3 times book, Werth said.

‘Right Track’

“Sanlam seems to be on the right track with its acquisition strategy,” said Warwick Bam, an analyst at Avior Capital Markets in Cape Town. “From a timing point of view, they might have caught this one right. They’re investing when markets and economies are at a low point. These valuation multiples could quickly unwind once we start seeing growth improve and businesses start investing in the continent.”

Sanlam and Santam first acquired a joint 30 percent stake in Saham two years ago, increasing this by a further 16.6 percent last May. Santam is still deciding whether to take part in the new deal, it said.

The Saham acquisition came as Sanlam announced an 18 percent increase in normalized headline earnings per share Thursday. New business volumes declined 1 percent amid pressure on premiums in South Africa, Namibia and Botswana, it said in an earnings statement.


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