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Key Points
- Sanlam Life plans to acquire a 25% stake in African Rainbow Capital’s Financial Services Holdings (FSH) for $135 million.
- ARC FSH will own 100% of ARC Financial Services Investments post-deal, with Sanlam contributing $135 million in shares and cash.
- Sanlam agrees to pay up to $3.92 million in an outperformance fee if ARC FSH’s investment in Tyme Investments exceeds targets by June 2028.
Sanlam Life, a subsidiary of Africa’s top insurer Sanlam has announced plans to acquire a 25 percent stake in African Rainbow Capital (ARC)’s Financial Services Holdings (FSH) a fully Black-owned and -controlled investment company led by Africa's first Black billionaire, Patrice Motsepe.
This deal valued at $135 million aims to strengthen Sanlam’s influence in the financial services sector and deepen its partnership with ARC.
According to the SENS announcement today, Sanlam Life will acquire one-fourth of ARC FSH's stake from African Rainbow Capital Investments in a deal involving a cash subscription of R2.41 billion ($135 million) for shares, and the transfer of Sanlam’s 25 percent interest in ARC Financial Services Investments (ARC FSI), valued at R1.49 billion ($83.43 million), to ARC FSH.
African Rainbow Capital Investments (ARCI) join forces with Sanlam Life
ARC FSH, which holds investments in Tyme Bank, AI Fund, CrossFin, and Ooba, will become the 100 percent owner of ARC FSI post-transaction which is expected to close by Aug. 31, 2024, pending regulatory approvals, with interest accruing at the prime rate if delayed.
Sanlam has agreed to pay ARC up to R70 million ($3.92 million) in an outperformance fee if ARC FSH’s investment in Tyme Investments (Asia) exceeds a specific hurdle rate by June 2028. Prior to the deal, ARC FSH was 50.1-percent owned by ARC and 49.9 percent owned by the ARC Fund.
Post-transaction, the ARC Fund's interest will be diluted, and it will receive around R800 million ($44.7 million) in net cash, part of which will be used to reduce debt in ARC FSH.
Patrice Motsepe's ARC sees strong financial performance
ARC, led by Patrice Motsepe, continues to target opportunities in South Africa and Africa's financial and diversified industries. Established in 2015 as a subsidiary of Ubuntu-Botho Investments, ARC’s origins date back to 2004 with a focus on building Black-controlled capital.
As of Dec. 31, 2023, ARC FSH reported a profit after tax of R1.81 billion ($101.02 million) and a net asset value of R11.99 billion ($669.98 million). ARC FSI reported a profit after tax of R610 million ($34.08 million) and a net asset value of R5.124 billion ($286.29 million).
Sanlam's 2021 investment in ARC FSI has broadened its financial services portfolio. This latest acquisition emphasizes Sanlam’s commitment to growth and enhancing its position in the financial sector. The transaction will enable ARC and Sanlam to further integrate their operations, bolstering their competitive edge.
