Sanlam Investments and Vukile Property Fund announced on Thursday that Vukile will acquire the Sanlam Properties asset management business, as well as an option to purchase certain properties from Sanlam Life valued at approximately R500 million.

The acquisition of Sanlam Properties asset management business is valued at almost R332 million and makes strategic sense for both parties, as Sanlam (SLM) is downscaling its fixed property assets and Vukile (VKE) is internalising the management of its assets in line with international norms and global best practice.

The deal, which will be settled by the issue of 36.47 million new Vukile units at 910 cents per unit, will increase Sanlam's shareholding in Vukile from 27.4% to 35.3%.

The acquisition is subject to the fulfilment of certain conditions precedent, including but not limited to unitholder and regulatory approval.

Johan van der Merwe, CEO of Sanlam Investments, said that the group has already reduced its fixed property asset portfolio by several billion over the past eight years.

"The Sanlam Group's focus is on a combination of fixed and listed property assets and it therefore makes sense for the entire function of property asset management to move to Vukile, a business which specialises and wishes to grow in this area."

Vukile chief executive Gerhard van Zyl added that the management of its assets, previously done by Sanlam Properties, will now be undertaken through its in-house resources.

"This shift is based on a worldwide trend for property companies to manage their assets in-house.

This, together with the proposed implementation in South Africa of the Real Estate Investment Trust (REIT) structure, will give further impetus to this approach. As for the proposed acquisition of properties from Sanlam Life, this is in line with our strategic objective of building a quality portfolio of properties with a strong contractual cash flow in order to give our unitholders meaningful capital appreciation and sustainable distribution growth," he said.

Following the conclusion of the transaction, Vukile will be responsible for the asset management of its own property portfolio and it will also provide property asset management services to Sanlam Life in respect of its entire property portfolio.

As announced previously, Vukile and Sanlam Properties have agreed to extend the existing asset management contract between the two parties for a maximum period of six months up to 30 September 2009 so as to allow for sufficient time to implement the transaction.

Source: I-Net Bridge