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SNT/ SLM - Santam/ Sanlam - A Pro Rata voluntary offer, an offer by
Sanlam to purchase Santam shares and a broad-based BEE transaction
Santam Limited
(Incorporated in the Republic of South Africa)
(Registration number 1918/001680/06)
JSE share code: SNT NSX share code: SNM
ISIN: ZAE000006854
("Santam")
Sanlam Limited
(Incorporated in the Republic of South Africa)
(Registration number 1959/001562/06)
JSE share code: SLM NSX share code: SLA
ISIN: ZAE000070660
("Sanlam")
A PRO RATA VOLUNTARY OFFER TO REPURCHASE UP TO 10% OF SANTAM`S
ISSUED ORDINARY SHARES FROM SANTAM SHAREHOLDERS, AN OFFER BY SANLAM
TO PURCHASE SANTAM SHARES TENDERED IN EXCESS OF 10% OF SANTAM`S
ISSUED ORDINARY SHARES ("THE OFFERS") AND A BROAD-BASED BLACK
ECONOMIC EMPOWERMENT ("BEE") TRANSACTION
1 INTRODUCTION
Santam and Sanlam shareholders are hereby advised that -
* Santam intends to make a pro rata voluntary offer to repurchase
up to 10% of its issued ordinary shares from all Santam
ordinary shareholders for a cash consideration of R102.00 per
share (the "voluntary repurchase offer");
* to the extent that Santam shareholders` acceptances of the
voluntary repurchase offer exceed 10% of the issued ordinary
shares of Santam, Sanlam intends to make an offer to acquire
the excess shares tendered at the same offer price (subject to
Sanlam`s shareholder funds not holding more than 80% of
Santam`s issued ordinary shares thereafter) (the "Sanlam
offer"); and
* a scheme of arrangement in terms of section 311 of the
Companies Act, No. 61 of 1973, as amended, (the "Companies
Act"), will be proposed, which, on becoming effective, will
result in Santam shareholders (following implementation of the
offers) becoming obliged to sell 10% of their ordinary shares
in Santam for a cash consideration of R82.00 per share to
facilitate a BEE transaction.
2 THE VOLUNTARY REPURCHASE OFFER
2 1 Rationale
The Santam board, having taken cognisance of the optimal solvency
levels and future capital requirements of Santam, is of the opinion
that Santam`s current capital level is surplus to its requirements
and therefore deem it appropriate to lower capital levels of
Santam`s South African operations ("Santam RSA") to approximately a
40% solvency margin (shareholders` funds expressed as a percentage
of net written premiums). Santam RSA`s required solvency margin in
terms of the proposed Financial Condition Reporting will be at a
level below the existing regulatory requirement of 25% and
significantly lower than Santam RSA`s calculated solvency margin as
at 31 December 2006 of 58%.
Santam has embarked on a capital reorganisation programme involving
inter alia a capital reduction by way of the voluntary repurchase
offer, and capital restructuring.
The Santam board is considering creating subordinated debt, non-
redeemable preference shares and other secondary capital
instruments. To this end, capacity will be created for the future
issuance of non-redeemable preference shares at the general meeting
referred to in paragraph 6. The extent to which the Santam board
issues the non-redeemable preference shares in due course will
depend inter alia on amendments to tax legislation and prevailing
market conditions. The secondary capital instruments will be
structured in such a way that they will qualify as capital for
regulatory solvency purposes, and will not adversely affect Santam`s
current Insurer Financial Strength rating. Further details hereof
will be issued in due course.
The voluntary repurchase offer will be effected through a wholly-
owned subsidiary of Santam, Guardian National Insurance Company
Limited (the "Santam subsidiary"). As the offer is voluntary, Santam
shareholders will be entitled to decide whether or not to accept the
voluntary repurchase offer.
2.2 Terms of the voluntary repurchase offer
Subject to the fulfillment or waiver (if possible) of the voluntary
repurchase offer suspensive conditions referred to in paragraph 2.6
below, the Santam subsidiary will purchase from Santam shareholders
all Santam shares tendered in terms of the voluntary repurchase
offer up to a maximum of 10% of Santam`s issued ordinary shares.
In the event that Santam shares are tendered to the Santam
subsidiary in excess of 10% of a Santam shareholder`s shareholding
in Santam, the Santam subsidiary will acquire from such shareholder
such number of further Santam shares, pro rata to the excess Santam
shares tendered to the Santam subsidiary, if the Santam board in its
discretion so resolves, subject to a maximum of 10% of the issued
ordinary shares of Santam. All Santam shares tendered and not
acquired by the Santam subsidiary shall be subject to the Sanlam
offer referred to in paragraph 3 below.
2.3 The voluntary repurchase offer consideration
The voluntary repurchase offer consideration comprises a cash
consideration of R102.00 per Santam ordinary share. The Santam board
has declared a final dividend of R2.62 per Santam ordinary share.
Santam ordinary shares will trade ex dividend from Friday, 16 March
2007 (the "ex dividend date") and will trade ex the right to
participate in the offers on or about Monday, 16 April 2007. Santam
shareholders who hold Santam ordinary shares on the ex dividend date
and dispose of Santam ordinary shares pursuant to the voluntary
repurchase offer, will receive both a dividend of R2.62 per Santam
share and the voluntary repurchase offer consideration of R102.00
per Santam share.
The voluntary repurchase offer consideration represents a premium of
8.5% to the volume weighted average price of R93.98 per Santam share
over the 5 trading days ending on Friday, 23 February 2007, being
the last practicable date prior to the finalisation of this
announcement (the "last practicable date"), and a premium of 11.6%
to the volume weighted average price of R93.98 per Santam share over
the 5 trading days ending on the last practicable date less a
dividend of R2.62 per Santam share.
2.4 Funding of the voluntary repurchase offer
The voluntary repurchase offer consideration will be funded out of
cash and liquid assets of the Santam Group.
2.5 The voluntary repurchase offer period
The voluntary repurchase offer will open for acceptances from 9:00
on Monday, 26 March 2007 and is expected to close at 12:00 on
Friday, 20 April 2007. Any amendments to the opening and closing
dates or times of the voluntary repurchase offer will be released on
SENS and published in the South African and Namibian press.
2.6 Suspensive conditions of the voluntary repurchase offer
The voluntary repurchase offer is subject to the fulfilment or
waiver (if possible) of the following suspensive conditions by no
later than Thursday, 31 May 2007, or such later date as Santam may
determine:
- a special resolution authorising the purchase by the Santam
subsidiary of Santam shares in terms of the voluntary
repurchase offer, being duly passed and subsequently registered
by the Registrar of Companies; and
- the Registrar of Short-term Insurance providing its required
approval for the voluntary repurchase offer and the
implementation thereof in terms of the provisions of section 23
of the Short-term Insurance Act, 1998 (Act 53 of 1998) (the
"Short-term Insurance Act").
2.7Financial effects of the voluntary repurchase offer
The table below sets out the unaudited pro forma financial effects
of the voluntary repurchase offer on basic earnings per share
("EPS"), headline EPS, net asset value ("NAV") per share and net
tangible asset value ("NTAV") per share, based on the audited
results of Santam for the financial year ended 31 December 2006. The
unaudited pro forma financial effects are the responsibility of the
directors of Santam and have been prepared for illustrative purposes
only to provide information about how the voluntary repurchase offer
may have affected the financial position of Santam shareholders on
the relevant reporting date. Due to their nature, the unaudited pro
forma financial effects may not be a fair reflection of Santam`s
financial position after implementation of the voluntary repurchase
offer or of Santam`s future earnings:
Before the Unaudite After the Change
voluntary d pro voluntary (%)
repurchase forma repurchase
offer (1) adjustme offer
(cents) nts (2,3,4,5)
(cents) (cents)
Basic EPS 1 574 119 1 693 8%
Diluted basic 1 553 115 1 668 7%
EPS
Headline EPS 1 555 117 1 672 8%
Diluted headline 1 535 113 1 648 7%
EPS
NAV per share 5 633 (508) 5 125 (9%)
NTAV per share 5 519 (520) 4 999 (9%)
Number of shares 117.6 (11.8) 105.9 (10%)
in issue
(millions)
Weighted average 117.1 (11.8) 105.4 (10%)
number of shares
in issue
(millions)
Notes:
(1) Extracted and/or compiled from the audited results of Santam
for the financial year ended 31 December 2006.
(2) For the purpose of calculating pro forma basic EPS and headline
EPS, it has been assumed that the voluntary repurchase offer
was effected on 1 January 2006.
(3) For the purpose of calculating pro forma NAV per share and NTAV
per share, it has been assumed that the voluntary repurchase
offer was effected on 31 December 2006.
(4) The following assumptions were applied with regard to the
voluntary repurchase offer:
- 11 768 606 ordinary shares were repurchased pursuant to the
voluntary repurchase offer, being 10% of Santam`s issued ordinary shares
as at the last practicable date;
- the total repurchase offer consideration was R1.2 billion for all
shares repurchased by the Santam subsidiary pursuant to the voluntary
repurchase offer;
- dividends of R117 million would have been paid to the Santam
subsidiary during the year on the repurchased shares;
- Secondary Tax on Companies ("STC") at a rate of 12.5% would have
been paid by Santam on these dividends;
- investment income at an average interest rate of 7.5% per annum
(before tax) was foregone or earned, as the case may be, on the cash
flows in respect of the payment of the total repurchase offer
consideration, the dividends received by the Santam subsidiary on the
repurchased shares and STC paid by Santam thereon; and
- a corporate tax rate of 29% has been applied.
(5) No transaction costs have been taken into account in the
calculation of the unaudited pro forma financial effects as
they will not have a material impact.
3 THE SANLAM OFFER
3.1 Rationale
The Sanlam offer affords Santam shareholders the opportunity to
dispose of more shares than the Santam subsidiary would, in
terms of the limit imposed under the voluntary repurchase
offer, be capable of accepting. It further provides Santam
shareholders with the opportunity to realise value for their
Santam shares, should they wish to exit, at a premium to the
current market price and with additional liquidity.
Sanlam`s maximum holding of 80% (when aggregated with Santam
shares already held by Sanlam in its shareholders` funds) of
the issued ordinary shares of Santam pursuant to the Sanlam
offer will allow Santam to meet the minimum spread requirements
of the JSE Limited`s Listings Requirements following the Sanlam
offer.
Increasing Sanlam`s stake in Santam through the Sanlam offer is
in line with Sanlam`s strategy of enhancing diversification and
growing Sanlam`s business into a balanced financial services
group.
3.2 Terms of the Sanlam offer
Subject to the fulfilment or waiver (if possible) of the Sanlam
offer suspensive conditions referred to in paragraph 3.6 below,
Sanlam will, through its wholly-owned subsidiary Sanlam Life
Insurance Limited, acquire from Santam shareholders all Santam
shares tendered by Santam shareholders in excess of the Santam
subsidiary`s maximum acceptance of 10% of the issued ordinary
shares of Santam in terms of the voluntary repurchase offer,
subject to a maximum of such number of Santam shares, which
when aggregated with Santam shares already held by Sanlam in
its shareholders` funds, represents 80% of Santam`s issued
ordinary shares.
In the event that Santam shares are tendered to Sanlam in
excess of the maximum number of Santam shares to be acquired by
Sanlam in terms of the Sanlam offer, Sanlam will acquire from
each Santam shareholder, such number of Santam shares, pro rata
to the number of Santam shares tendered in terms of the Sanlam
offer, subject to the acquisition by Sanlam of the maximum
number of Santam shares referred to above.
3.3 The Sanlam offer consideration
The Sanlam offer consideration comprises a cash consideration
of R102.00 per Santam ordinary share, equal to the voluntary
repurchase offer consideration. Santam shareholders who hold
Santam ordinary shares on the ex dividend date and dispose of
Santam ordinary shares pursuant to the Sanlam offer, will
receive both a dividend of R2.62 per Santam share and the
Sanlam offer consideration of R102.00 per Santam share.
The Sanlam offer consideration represents a premium of 8.5% to
the volume weighted average price of R93.98 per Santam share
over the 5 trading days ending on the last practicable date,
and a premium of 11.6% to the volume weighted average price of
R93.98 per Santam share over the 5 trading days ending on the
last practicable date less a dividend of R2.62 per Santam
share.
3.4 Funding of the Sanlam offer
The Sanlam offer consideration will be funded out of cash and
liquid assets of the Sanlam Group.
3.5 The Sanlam offer period
The Sanlam offer will open for acceptances from 9:00 on Monday,
26 March 2007 and is expected to close at 12:00 on Friday, 20
April 2007. Any amendments to the opening and closing dates or
times of the Sanlam offer will be released on SENS and
published in the South African and Namibian press.
3.6 Suspensive conditions of the Sanlam offer
The Sanlam offer is subject to the fulfilment or waiver (if
possible) of the following suspensive conditions by no later
than Thursday, 31 May 2007, or such later date as may be agreed
between Sanlam and Santam:
- the voluntary repurchase offer becoming unconditional; and
- the Registrar of Short-term Insurance providing its required
approval for the Sanlam offer and the implementation thereof in
terms of the provisions of section 25 of the Short-term
Insurance Act.
3.7 Financial effects of the Sanlam offer
The table below sets out the unaudited pro forma financial
effects of the Sanlam offer on core EPS, headline EPS, NAV per
share, NTAV per share and embedded value ("EV") per share,
based on the reviewed results of Sanlam for the six months
ended 30 June 2006. The unaudited pro forma financial effects
are the responsibility of the directors of Sanlam and have been
prepared for illustrative purposes only to provide information
about how the Sanlam offer may have affected the financial
position of Sanlam shareholders on the relevant reporting date.
Due to their nature, the unaudited pro forma financial effects
may not be a fair reflection of Sanlam`s financial position
after implementation of the Sanlam offer or of Sanlam`s future
earnings:
Before Unaudite After Change
the d pro the (%)
Sanlam forma Sanlam
offer adjustme offer
(1) nts (2,3,4)
(cents) (cents) (cents)
Basic core EPS 71.3 1.6 72.9 2%
Diluted core EPS 69.9 1.6 71.5 2%
Basic headline EPS 141.1 1.4 142.5 0%
Diluted headline EPS 138.4 1.3 139.7 1%
NAV per share 1 115 - 1 115 0%
NTAV per share 934 ( 4) 930 0%
EV per share 1 750 - 1 750 0%
Notes:
(1) Extracted from the reviewed interim results of Sanlam for the
six months ended 30 June 2006.
(2) For the purpose of calculating pro forma core EPS and headline
EPS, it has been assumed that the Sanlam offer was effected on
1 January 2006.
(3) For the purpose of calculating pro forma NAV, NTAV and EV per
ordinary Sanlam share, it has been assumed that the Sanlam
offer was effected on 30 June 2006.
(4) The following assumptions were applied with regard to the
Sanlam offer:
- 50% of the number of Santam ordinary shares that Sanlam could
have acquired to reach its maximum holding after the Sanlam
offer, were acquired by Sanlam at the Sanlam offer
consideration of R102.00 per share;
- the total Sanlam offer consideration of R1.05 billion for all
shares acquired by Sanlam pursuant to the Sanlam offer was
withdrawn from a balanced portfolio;
- the excess of the total Sanlam offer consideration paid over
the net asset value of the minority interest acquired is
regarded as goodwill, which is not amortised, but tested for
impairment on a regular basis; and
- EPS increased due to the reversal of the proportionate minority
shareholders` interest in Santam`s EPS and reduced due to the
investment income of 1.8% after tax and investment surpluses of
5.3% after tax (based on actual earned during the six months
ended 30 June 2006 on the balanced portfolio from which the
total Sanlam offer consideration was withdrawn) .
3.8 Information on Santam
Santam provides short-term insurance products and services
using its broker network as the primary distribution channel.
Santam operates in the personal lines and commercial markets
and for 2006 its business comprised approximately 35% personal
lines and 65% commercial business.
Santam`s underwrites all classes of short-term insurance, with
motor and property business making up approximately two-thirds
of the total, in line with the current composition of the South
African short-term insurance industry. Santam has assets
totaling more than R16 billion.
4 BEE TRANSACTION
The Santam board has resolved to enter into a BEE transaction
that will involve the sale of 10% of Santam`s issued ordinary
shares after the offers have been effected, to the following
categories of BEE partners:
- Santam staff;
- broad-based community trusts; and
- strategic business partners.
In order to effect the proposed BEE transaction, a scheme of
arrangement will be proposed between Santam and its shareholders in
terms of section 311 of the Companies Act, in terms of which a
vehicle housing the BEE partners` interest will acquire 10% of each
Santam shareholder`s Santam ordinary shares at a cash consideration
of R82.00 per Santam share, being a discount of 12.7% to the volume
weighted average price of R93.98 per Santam share over the 5 trading
days ending on the last practicable date, and a discount of 10.2% to
the volume weighted average price of R93.98 per Santam share over
the 5 trading days ending on the last practicable date less a
dividend of R2.62 per Santam share. Further details of the proposed
BEE transaction will be outlined in a scheme document to be posted
to Santam shareholders on or about Friday, 23 March 2007.
OPINIONS AND RECOMMENDATIONS
Opinion of Rand Merchant Bank
FirstRand Bank Limited acting through Rand Merchant Bank Corporate
Finance ("RMB") has been appointed by the directors of Santam to
provide them with an opinion as to whether the consideration to be
received by Santam shareholders in terms of the offers is fair and
reasonable. The fair and reasonable opinion of RMB will be included
in the circular referred to in paragraph 9 below to be posted to
Santam shareholders. RMB has provided a favourable preliminary
opinion, which preliminary opinion may be subject to change and is
subject to the same limitations and conditions as its final opinion.
5 Opinion of the Santam board
5.1 The Santam board appointed an independent sub-committee to
consider the terms and conditions of the offers and to make
recommendations to the Santam board in this regard. After
considering the opinion of RMB referred to in paragraph 5.1 and
the advice of the independent sub-committee, the Santam board
will, in the circular referred to in paragraph 9 below, provide
an opinion to the Santam shareholders on the terms and
conditions of the offers. Based on the preliminary opinion of
RMB, the Santam board considers the terms of the offers to be
fair and reasonable. Subject to the final fair and reasonable
opinion of RMB, the Santam board recommends that Santam
shareholders vote in favour of the resolution required to give
effect to the voluntary repurchase offer. Those Santam
directors who hold Santam ordinary shares intend voting in
favour of the required resolution in respect of their Santam
ordinary shares.
6 GENERAL MEETING
A general meeting of Santam shareholders will take place at the
registered office of Santam, 1 Sportica Crescent, Tyger Valley,
Bellville on Thursday, 29 March 2007 at 10:00, in order to consider
and, if deemed fit, pass, with or without modification, the
resolutions required to implement the voluntary repurchase offer as
set out in the notice of general meeting attached to and forming
part of the circular to be posted to shareholders on or about
Wednesday, 7 March 2007.
7 SETTLEMENT PROCESS
Santam, in respect of the repurchase offer, and acting as agent for
Sanlam in respect of the Sanlam offer, will, through its transfer
secretaries, Computershare Investor Services 2004 (Proprietary)
Limited, administer and effect settlement of the offer consideration
to Santam shareholders whose shares are acquired in terms of the
offers.
8 SAILIENT DATES AND TIMES
2007
Circular posted to Santam shareholders, Wednesday, 7 March
on
Santam shares trade ex dividend from Friday, 16 March
9:00, on 2007
Scheme circular posted to Santam Friday, 23 March*
shareholders (in respect of the
proposed BEE transaction)
The offers open at 9:00, on Monday, 26 March
Last day to lodge forms of proxy for Tuesday, 27 March
the general meeting by 10:00, on
General meeting to be held at 10:00, on Thursday, 29 March
Results of the general meeting released Thursday, 29 March
on SENS, on
Results of the general meeting Friday, 30 March
published in the South African and
Namibian press, on
Registration of special resolutions Friday, 30 March *
passed at the general meeting by the
Registrar of Companies, on
Last day to trade in order to Friday, 13 April *
participate in the offers, on
Santam ordinary shares trade ex the Monday, 16 April *
right to participate in the offers, on
Record date on which Santam Friday, 20 April *
shareholders must be recorded in the
register in order to participate in the
offers, on
Last day to lodge forms of acceptance Friday, 20 April *
and surrender to accept the offers at
12:00, on
The offers close at 12:00, on Friday, 20 April *
Results of the offers released on SENS, Monday, 23 April *
on
Results of the offers published in the Monday, 23 April *
South African and Namibian press, on
Voluntary repurchase offer Monday, 23 April *
consideration and Sanlam offer
consideration posted or cash
electronically transferred to
certificated shareholders, from
Safe custody account held with Monday, 23 April*
CSDP/broker credited and updated in
respect of the voluntary repurchase
offer consideration and the Sanlam
offer consideration to dematerialised
shareholders, on
Scheme meeting (in respect of the Thursday, 26 April*
proposed BEE transaction) to be held at
10:00, on
Operative date of the scheme of Monday, 30 April*
arrangement (in respect of the BEE
transaction), on
* Estimated dates
Notes:
1. All times shown in this announcement are South African local
times.
2. The above dates and time are subject to change. Any material
change will be published in the South African and Namibian press and
released on SENS.
3. In the event that the suspensive conditions of the offers have
not been fulfilled or waived (if possible) by the time the offers
close, the timetable will need to be extended accordingly.
4. Santam shares may not be dematerialised or rematerialised between
Monday, 16 April 2007 and Friday 20 April 2007, both days inclusive.
CIRCULAR
A circular setting out the full details of the offers and including
a notice of general meeting, form of proxy and forms of acceptance
and surrender will be posted to Santam shareholders on or about
Wednesday, 7 March 2007.
Bellville
27 February 2007
Merchant bank and transaction Financial adviser and
sponsor to Santam transaction sponsor to Sanlam
RAND MERCHANT BANK DEUTSCHE SECURITIES
(A division of FirstRand Bank
Limited)
Legal advisers to Sanlam
Sponsor to Santam JOWELL GLYN & MARAIS
INVESTEC BANK LIMITED
Date: 27/02/2007 08:05:01 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department.
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