South Africa’s largest insurer jumps R11 billion in a day
Santam saw its share price skyrocket after Sanlam announced its intention to take full ownership of the company.
On Monday, 5 October, Santam’s shares were trading at 47,500 cents at close, a 19% premium over the previous day.
The sudden hike came immediately after Sanlam announced its intention to acquire the company, which it already holds majority ownership in.
The insurance giant has also seen its share price increase by 20.4% over the last six months, adding 8,052 cents to its price, largely due to Monday’s rally.
The group’s market cap was around R44 billion before the announcement, and jumped almost R11 billion to R54.7 billion on 6 October.
Speaking to BusinessDayTV, Merchant West managing director Alyssa Viljoen said the deal was a positive for Santam’s shareholders.
She said the premium Sanlam is paying for its Santam shares is good news for the business’s stakeholders.
In its firm intention announcement, Sanlam said it would offer R505 per share for all ordinary shares in Santam, a roughly 26% premium on the company’s previous close.
For Sanlam, Viljoen said the deal was a good strategy to capture the full earnings of the company and increase its exposure to the insurance market.
“This is a really good strategic move,” she said. “They can now capture 100% of the earnings of Santam.”
Despite this positive perspective, Sanlam’s shares were in the red when markets closed on Monday, following the deal’s announcement.
The group traded at 7,700 cents per share when the bell rang, a 1.47% decline from the last day of trading on Friday.
Viljoen also said the acquisition would simplify the group and help give Sanlam more flexibility in its operations.
“It really simplifies the group for Sanlam, and they are getting more flexibility on their capital allocation,” she said.
“The only bad thing is that now we are losing another quality company from the JSE.”
As part of the proposed acquisition, Santam would fully delist from the Johannesburg Stock Exchange (JSE).
This would bring an end to Santam’s 62 years of trading on the bourse, having listed on the exchange in 1964.
Caught by surprise
While Santam and Sanlam are closely linked, Viljoen said the takeover announcement caught investors by surprise on Monday.
She said the deal “was always on the cards. But did we expect it? Not really.”
She said the deal did not come as too much of a shock, since Sanlam has previously tried to take ownership of Santam.
“Sanlam has historically tried to do a similar deal with Santam, and it failed,” she said.
The two companies share a close history, dating back to 1918, when Santam helped found Sanlam as a parent company.
This relationship changed in 1954 when Sanlam became an independent company and took majority ownership of Santam.
Today, Santam is South Africa’s largest short-term and general insurance company, holding a market share of approximately 22%, according to its website.
For the insurance giant, the proposed acquisition is intended to give long-term support and accelerate its existing growth strategies.
“Full private ownership underscores Sanlam’s enduring commitment to driving Santam’s sustained growth and long-term stability,” the companies said in a joint statement.
They said the takeover would give Santam “continued access to Sanlam’s scale, capital strength, and diversified capabilities, reinforcing Santam’s competitive advantage in general insurance.”
They also said the deal is aimed at “strengthening South African leadership, driving international expansion and scaling ecosystems through broader group partnerships.”
For Sanlam, the acquisition would simplify the company and improve shareholders’ understanding of it, the companies said.
“The Proposed Transaction simplifies the Sanlam Group structure, strengthens Sanlam’s equity story, enhancing investor understanding of the Sanlam Group,” they said.
“It is also expected to enhance trading liquidity in Sanlam shares by consolidating multiple listed entry points into a single platform.”
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