The deal will see Sanlam expanding its offering to clients, with affordable medical aid on the cards. AfroCentric’s share price rises over 20%.
JSE-listed financial services group Sanlam on Tuesday announced that it has submitted an official offer letter to acquire a controlling stake in JSE-listed healthcare company Afrocentric Investment Corporation.
The transaction will see Sanlam owning no less than 36.9% of AfroCentric shares, at a price of R6 a share. The deal will also see Sanlam transferring its 28.7% stake in ACT Healthcare Assets – a subsidiary of the AfroCentric Group which controls group entities including the Medscheme medical scheme administration business and pharma businesses Pharmacy Direct and Activo – in exchange for an equal shareholding in AfroCentric Group.
If approved, the transaction will allow Sanlam to expand its client proposition and offer clients a more holistic product offering, which will include affordable medical aid, health insurance and administration.
“Afrocentric is focused on delivering affordable medical aid, health insurance and administration which complements Sanlam’s purpose of enabling its clients to be financially secure and prosperous,” the companies said in a joint Sens announcement.
For majority black-owned AfroCentric, the deal provides access to Sanlam’s wider distribution network and additional benefits for its clients, who will have access to the overall Sanlam product offering.
AfroCentric group CEO Ahmed Banderker staed: “There is a great drive towards affordable and accessible healthcare in this country. Between Sanlam and AfroCentric, our offerings and capabilities combined can truly shape the future of South African healthcare.”
Acquisition terms
The joint statement says the transaction will allow AfroCentric shareholders the option to let go of their shares either for a total cash consideration, a combination of Sanlam shares and cash or in a 100% exchange of AfroCentric shares for Sanlam shares.
AfroCentric shareholders who choose to exchange their AfroCentric shares for Sanlam shares will be able to get one Sanlam share for every 10 AfroCentric shares through a partial offer consideration.
“The offer consideration represents a premium of 49.01% to the 30-day VWAP [volume-weighted average price] of an Afrocentric Share, and a premium of 55.84% to the closing price of an Afrocentric Share (namely R3.85 per Afrocentric Share), on the JSE as at 7 October 2022.”
Market reaction
News of Sanlam’s intentions to secure controlling interests in AfroCentric boded well for the latter, with its share price jumping 24.34% on the JSE to R5.21 during morning trade on Tuesday.
However, the same was not evident for Sanlam, which registered a share drop of 1.77% to R49.33.
Sanlam and AfroCentric intraday share prices
AfroCentric already has a presence in Namibia and Botswana and will remain listed in South Africa. Its 3.8 million members and the services it offers “at affordable price points” make the company an attractive addition to Sanlam, according to CEO Paul Hanratty.