Sanlam has offered to buy the 37.3% of Santam it does not already own in a R20.7 billion ($1.2 billion) deal that will see South Africa’s largest short-term insurer delisted from the JSE.
The financial services group announced this week it will pay R505 in cash for each Santam share through its wholly owned subsidiary Sanlam Life. The offer represents a 26.6% premium to Santam’s closing price of R399 on 2 October.
Sanlam already holds approximately 62.7% of Santam on an effective basis. If the transaction goes ahead, Santam will become wholly owned by Sanlam and will be delisted from the JSE, Namibian Securities Exchange and A2X Markets.
The deal is structured as a scheme of arrangement under South Africa’s Companies Act and requires approval from Santam shareholders. Sanlam shareholders do not need to vote on the transaction because it is classified as a Category two transaction.
Market responds with mixed signals
Santam shares jumped 19% to close at R475 on Monday, adding nearly R11 billion to its market capitalisation. However, the shares traded below the R505 offer price, with the R30 gap reflecting deal risk and the time value of money before the expected first quarter 2027 completion.
Sanlam shares fell 1.47% to R77, suggesting investors questioned the price and opportunity cost of the acquisition.
Santam’s independent board has unanimously supported the scheme and intends to recommend that eligible minority shareholders vote in favour, subject to the independent expert’s report.
What it means for shareholders
Santam minority shareholders will receive a cash premium and certainty, but will give up future participation in the insurer’s earnings and dividends. Long-term holders may also face capital gains tax consequences.
For Sanlam shareholders, the deal removes the complexity of having two listed entry points into closely connected businesses and eliminates duplicated listing costs. Management argues full ownership will improve coordination between Santam’s short-term insurance operations and Sanlam’s broader African, Indian and Lloyd’s-related platforms.
However, some investors questioned whether the R20.7 billion could have been deployed in higher-growth opportunities. Mergence Investment Managers’ Radebe Sipamla said Sanlam could have used the funds for expansion in India or Africa.
Sanlam CEO Paul Hanratty said the offer equates to about 11.7 times Santam’s forward earnings, compared with roughly ten times before the announcement.
Timeline and conditions
Sanlam expects to publish the joint circular on or about 3 November and hold the Santam scheme meeting on or before 30 November. The transaction is expected to close in the first quarter of 2027, subject to shareholder, regulatory and other conditions.
Competition approval is not required because Sanlam already controls Santam, although relevant financial regulatory approvals remain applicable.
The delisting will remove a long-standing, high-quality South African insurance listing and reduce the number of investable JSE entry points into the local financial services sector.
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