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South African financial services group Sanlam Investment Holdings (SIH), backed by billionaire Patrice Motsepe, has announced the conclusion of a takeover deal with Absa Financial Services that will result in Absa exchanging its interest in its asset management business for a stake in Sanlam.
Known fully as Amalgamated Banks of South Africa, Absa Financial Services is a South African-based financial services group.
The merger of its asset management division, Absa Investments, with Sanlam’s operation will set the financial services provider on course to control a 17.5-percent stake in SIH.
Under the merger agreement, the Absa businesses to be acquired will include: Absa Asset Management, Absa Alternative Asset Management, Absa Fund Managers (excluding the Absa Prudential Money Market Fund), Absa Multi Management and Absa’s NewFunds (RF) Proprietary Limited (excluding the commodity ETF business).
Although the date of the merger’s completion has not been communicated, the transaction is expected to be effective during the first half of 2022, as the group will continue to consolidate SIH from the effective date of the transaction.
What this deal means for the financial services industry
The combination of Absa’s asset management business and the Sanlam-owned equivalent will create a behemoth with assets under management in excess of R1 trillion ($72.7 billion).
The new entity to be formed after the completion of the merger terms is expected to be one of the country’s largest money managers behind the state-owned Public Investment Corp.
As of June 30, Sanlam and Absa Investments had assets under management, administration and advice of R879 billion ($58 billion) and R238 billion ($15.7 billion), respectively.
The conclusion of the merger will further enhance Sanlam’s reach and dominance in the industry as one of South Africa’s largest Black-owned asset managers.
Sanlam CEO Paul Hanratty said the transaction will strengthen the group’s ability to deliver investment excellence for customers through its robust ability to further invest in the business.
For Absa, the transaction will deliver improved scale, capabilities, customer propositions and transformation, all of which are essential for achieving growth in the investment management sector, Absa Interim Group CEO Jason Quinn said.
“The transaction will help us create a deeper, broader range of investment solutions for our clients, as there is an exciting complementary nature to the relationship, which we believe will realise value for all of our stakeholders,” Quinn said.
SIH is Sanlam’s third-party asset management business, in which Patrice Motsepe’s ARC Financial Services Investments Proprietary Limited is a shareholder.
ARC has a 25-percent ownership interest in SIH through its 25-percent shareholding in SIH’s holding company, with Sanlam owning the remaining 75 percent.
