DealMakers - 2022 Annual
Deal of the Year
Creating a premier pan-African offering
The deal announced in May 2022 was almost two years in the making, and valued in excess of R33bn. The combined African operations of Sanlam and global integrated financial services group, Allianz creates the premier pan-African, non-banking financial services entity, operating in 27 countries across the continent, with positions strengthened in 12 overlapping countries.
With a presence in Africa since 1912, Allianz has a strong foothold in the key African countries of Egypt, Kenya, Cameroon and Uganda, with an insurance portfolio spanning 11 countries, excluding South Africa, with 2,600 employees serving c. 2 million customers.
The complex transaction involves multiple steps and a number of smaller interrelated deals, as follows:
Sanlam will hold the controlling 60% interest in the joint venture, with the ability for Allianz to increase its shareholding to a maximum of 49% over time.
Sanlam Emerging Markets (SEM) and its associated entities will contribute their African assets –excluding South Africa, Continental Re and SEM’s Namibian subsidiaries, but including its 90% shareholding in SAN JV (RF) – for a 60% shareholding in the joint venture.
Allianz will contribute all its African assets (including its minority stake in African Reinsurance Corporation and its shareholding in Jubilee’s general insurance businesses in Kenya, Uganda and Burundi).
Allianz acquired Santam’s 10% shareholding in SAN JV (R2bn), and Allianz will also contribute its 10% shareholding in SAN JV to the joint venture. Allianz’s contributions will be exchanged for a 40% shareholding in the joint venture.
Sanlam’s operations in Namibia will be contributed to the joint venture at a later stage, and at a time when Allianz will have the option to increase its shareholding in the joint venture to 49%.
Sanlam’s operations in India, the Middle East and Malaysia will not be contributed to the joint venture.
The joint venture will not only bring scale to some markets, it will see the parties leverage each
other’s strengths to unlock synergies and provide customers with innovative insurance solutions.
The partnership of Sanlam’s expertise in Africa and Allianz’s global capabilities and insurance
solutions will increase life and general insurance penetration, accelerate product innovation, and
drive financial inclusion in high-growth African markets. The ambition is to be a ‘Top 3’ insurance company in all chosen markets. Sanlam CEO, Paul Hanratty said at the time, “In line with Sanlam’s stated ambition to be a leading pan-African financial services group, the proposed joint venture will enable us to take a significant step towards realising that ambition. It will also strengthen our leadership position in multiple key markets that are core to our Africa Strategy, building quality and scale where it matters”. The chairmanship of the joint venture partnership will rotate every two years between Sanlam and Allianz.
The transaction required engagement with multiple advisers in the African jurisdictions, involving structuring and implementation, asset due diligence, an extensive disclosure process, and regulatory and stakeholder engagement advice across English, French and Portuguese-speaking Africa.
The deal remains subject to certain conditions precedent, such as the required approvals from competition authorities and ¬financial/insurance regulatory authorities, and due to the size and intricacy of the transaction, it is expected to take up to 18 months to close.
Standard Bank, J.P. Morgan, Webber Wentzel, Bowmans and PwC.
Comment from the Independent Panel: This transaction reshapes the African insurance industry. The transaction involves 27 countries and 12 overlapping countries, creating complexity in terms of valuations, due diligence, and regulatory
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Unlocking value for shareholders
Unfortunately, our investment model, and those with similar structures, has fallen out of favour globally. The ever-increasing discounts at which investment holding companies trade now negate the benefits of being listed”. This statement by CEO Piet Mouton marked the catalyst for a transaction which would pursue a value-unlock initiative for shareholders through a restructuring of a nature not seen before in South Africa; one involving six JSE-listed companies, two of which were dual-listed.
This is not the first value unlock initiative carried out by the PSG Group. In 2020, management unbundled Capitec in a transaction which delivered R21bn to shareholders. Yet despite this, the Group continued to trade at a 30% discount.
In a two-step proposal, PSG Group would:
Unbundle the shares in its underlying investments by way of a distribution in specie to PSG shareholders of a 61.1% stake in PSG Konsult, a 63.6% stake in Curro, a 34.7% stake in Kaap Agri, a 47% stake in CA&S and a 25.1% stake in Stadio, valued at R19,4bn.
However, the unbundling would only proceed if minority shareholders were willing to agree to the second step, to:
PSG Capital, Tamela, Cliffe Dekker Hofmeyr, BDO and Deloitte.
Mediclinic International take private
In June 2022, press speculation relating to a potential acquisition involving Mediclinic by Remgro and Swiss-headquartered MSC Mediterranean Shipping (MSC) resulted in confirmation by the parties that on 26 May, the Consortium had made a proposal to the Board of Mediclinic regarding a possible cash offer for the issued and to be issued share capital of Mediclinic not already owned by Remgro, at a price of 463 pence per share. The Consortium comprised equally of Remgro, Mediclinic’s long-term 44.6% shareholder, and MSC subsidiary SAS Shipping Agencies Services (SAS). The proposal was inclusive of the final dividend of 3 pence per share declared by Mediclinic on 25 May 2022. The proposal was rejected by the Mediclinic Board of Directors.
Sell their remaining PSG shares (representing the unlisted portfolio of PSG Alpha, the private equity business, its investments in Zeder and a remaining shareholding in Stadio) in a share buyback implemented by way of a scheme of arrangement. Shareholders holding 136,9m PSG Group shares were offered R23.00 per share at an estimated cost of R3,15bn. Excluded from the scheme were management (5%) and founders and immediate family (20.1%).
The unbundling presented a windfall for shareholders, immediately wiping out the discount to net asset value (NAV). A discount, the group said, rarely fell to less than 30%, and reached nearly 40% at times. The value of R115.59 per share was unlocked for exiting shareholders, representing a 41.3% premium to the closing price on 28 February 2022, amounting to c. R22,54bn.
The transaction involved significant engagement with an array of regulators, such as SARS, SARB,
the competition authorities, the JSE, the Takeover Regulation Panel and the Prudential Authority. A
condition precedent to the transaction was the transfer of the listing of CA&S from the Cape Town
Stock Exchange to the JSE – a move with its own complexities and challenges as the company has a dual primary listing on the Botswana Stock Exchange.
The group was founded by Jannie Mouton and Chris Otto in 1995, with the aim of building a financial
services conglomerate, and delisted from the JSE on the 27th of September 2022.
In August, the Boards reached an agreement. In terms of the offer, Mediclinic shareholders owning the remaining 55.44% stake would be entitled to receive 504 pence (R102,06) per share in cash, plus the declared final dividend of 3 pence per share. The offer, by special purpose vehicle, Manta Bidco, provided Mediclinic shareholders with an exit premium of 50% on the six-month average price at the time, valuing the offer at £2,05bn (R41,85bn), and 100% of the share capital of Mediclinic at c. £3,7bn at an implied enterprise value of c. £6,1bn.
Standard Bank, Morgan Stanley, Rand Merchant Bank, Webber Wentzel, Bowmans and Cliffe Dekker Hofmeyr.
Remgro would up its stake in the special purpose vehicle from 44.6%, by acquiring an additional 5.4% for £201m, with MSC providing the remaining cash for the transaction. MSC is well positioned to provide long-term capital, as well as insight and experience from operating a global business which will support the strategic ambitions of the Mediclinic management team as it seeks to benefit from the demands of an increased average aging global population under-catered for by its governments.
Established by Remgro in 1983, Mediclinic has operations in Switzerland (14 hospitals/four day clinics), the Middle East (seven hospitals/two day clinics) and in southern Africa (50 hospitals/five subacute hospitals/two mental health facilities/14 day clinics). It also has a 29.7% stake in UK-based Spear Healthcare Group.
The deal speaks to Remgro’s strategy of prioritising ownership of structurally attractive, unlisted assets. Not unlike other companies, Remgro has battled to narrow the gap between its share price and its underlying value, so it is hoped that the take private of Mediclinic and other assets in the future may result in a better valuation for the company.
Comment from the Independent Panel: The panel noted the courage of the decision to unbundle and delist PSG, the value unlock that this created, and the complexity of multiple unbundlings and a concurrent delisting.
Comment from the Independent Panel: This transaction shows foreign confidence in SA’s hospital industry. It is a large transaction (£3,7bn) with multi-jurisdictional complexity.