South Africa’s leading insurance company, Sanlam Ltd., is set to make a significant investment by purchasing a 25% stake in African Rainbow Capital Financial Services Holdings, a company supported by billionaire Patrice Motsepe, and also Sanlam’s deputy chairman. African Rainbow Capital Financial Services Holdings has controlling interests in various financial entities, including the digital bank TymeBank.
The deal, valued at approximately 3.9 billion rand ($218 million), involves Sanlam’s Life unit acquiring a quarter share of African Rainbow Capital Financial Services Holdings. This holding company has stakes in several prominent businesses, such as TymeBank, AI Fund, CrossFin Holdings, and Ooba. The transaction will be structured through a combination of cash and share swap. Sanlam will pay 2.413 billion rand in cash and trade its 25% shareholding in African Rainbow Capital Financial Services Investments, which is valued at 1.492 billion rand, for a corresponding value of shares in the broader holding company.
TymeBank, a notable asset within African Rainbow Capital’s portfolio, has backing from global tech giant Tencent Holdings Ltd. and is estimated to be worth close to $1 billion, according to its CEO, Coenraad Jonker. This digital bank has rapidly gained attention for its innovative approach to banking, targeting underserved communities in South Africa.
Analysts see this move as a strategic one for Sanlam. Adrienne Damant from Avior Capital Markets Pty Ltd. notes that the transaction presents an opportunity for Sanlam to swap its existing investments for ones with potentially higher returns. Moreover, TymeBank’s extensive distribution network could be leveraged by Sanlam to offer its insurance products to South Africa’s mass market, thus expanding its customer base.
While Sanlam’s shares experienced a decline for the second consecutive day, dropping as much as 4.1%, shares of African Rainbow Capital Investments saw a significant increase, rising by up to 9.2%. This market reaction highlights the differing investor sentiment surrounding the companies involved in the deal.
Sanlam has indicated that the 25% stake will be classified as an investment in an associate, reflecting its intention to maintain a strategic partnership rather than full control. The proposed acquisition aligns with Sanlam’s broader strategy to expand its footprint in the financial services sector through collaborative ventures with African Rainbow Capital Financial Services Holdings and its associated companies. According to the regulatory filing, this partnership is seen as a “natural extension” of Sanlam’s existing interests, with further strategic collaborations expected in the future.
