March 8, 2004

By Edward West

Cape Town - Sanlam clients would not be forced into financing a large part of the insurance company's empowerment deal, but would decide whether they wanted to participate in the funding, according to Flip Rademeyer, the executive director of finance at Sanlam.

Buyers of a new investment product and some wealthy clients would be the funders behind the R350 million loan that Sanlam intended to raise from policyholders for part of its R1.148 million preference share issue.

The issue would fund the Ubuntu-Botho empowerment grouping's acquisition of a 10 percent stake in Sanlam.

Redeemable in 2013, the issue would be funded from a R398 million loan from the Demutualisation Trust, R400 million from institutions at 9 percent a year and R350 million from Sanlam client's portfolios at the same rate.

There would also be a free issue of 2 percent or 56.4 million shares, which would be held by the Development Trust, which in turn would hold 20 percent of the Ubuntu-Botho empowerment grouping.

Rademeyer said the intention was to offer the R350 million loan to Sanlam clients as a product.

Some of Sanlam's portfolio managers might also take up some of the loan because the return, fixed over 10 years, was "not bad", said Rademeyer.

He said the funding returns were fixed at 9 percent to create certainty for the empowerment partners.
 

Sanlam shareholders would decide on April 1, Rademeyer said.

The loan from Sanlam's Demutualisation Trust will involve the trust selling 52 million of the 57 million remaining unclaimed shares.

Unclaimed shares are those shares that were issued to policyholders at the time of Sanlam's demutualisation but which have not yet been claimed by policyholders. If the shares are not claimed by 2008, the shares go back to Sanlam.

The Demutualisation Trust would receive dividends from the preference shares and an additional 15 percent.

Patrice Motsepe, the chief executive of African Rainbow Minerals, will put R200 million cash on the table so that Ubuntu-Botho can take a 10 percent stake in Sanlam, a shareholding which will include the 2 percent issued to the Development Trust and excludes the option to acquire another 2 percent of Sanlam's shares. The Development Trust will later undertake the corporate and social investment activities of Sanlam.

An empowerment company called Sizani, headed by Motsepe, will hold 55 percent of Ubuntu-Botho's shares while a broad-based empowerment group, still to be formed, will hold 25 percent of the shares.

This empowerment group is expected to include groupings of between 50 to 80 people, and a women's group, from each province.

Sanlam lost 3c to close at R9.27 in Johannesburg on Friday.