Sanlam has agreed to acquire investment management firm Absa Investments from Absa in a deal that will create a fund manager overseeing more than R1trn in assets.

As of 30 June 2021, Sanlam Investment Holdings (SIH) and Absa Investments had assets under management, administration and advice of R879bn and R238bn, respectively.

SIH will acquire the following Absa businesses:

Absa Asset Management (ABAM);
Absa Alternative Asset Management (AAM);
Absa Fund Managers (AFM) but excluding the Absa Prudential Money Market fund;
Absa Multi Management (AMM); and
Absa’s NewFunds (RF) Proprietary Limited but excluding the commodity ETF business).
Absa Financial Services (AFS) will exchange its entire interest in ABAM, AAM, AFM, excluding the Absa Prudential Money Market fund, and AMM for a shareholding of up to 17.5% in SIH.

ABAM will be the Absa Prudential Money Market Fund’s asset manager. The value of ABAM for purposes of the investment management transaction does not include the value of that contract, Sanlam said.

‘The value of this contract and the further consideration to be paid to AFS for it as part of the investment management transaction will be determined 12 months after the effective date of the investment management transaction about the value of the contract at that date,’ the insurance company said.

Effective in 2022
Sanlam said it expected the transactions to take effect during the first half of 2022.

AFS and SIH have also entered into a distribution agreement. As a result, SIH will be the preferred provider of investment products for distribution through Absa channels.

In addition, the intention is that Sanlam’s subsidiary Glacier Financial Solutions acquire Absa’s market-linked investment service provider (Lisp) business and a relationship agreement with Absa under which Glacier will become the preferred Lisp for certain Absa intermediaries.

‘The conclusion of these agreements is a suspensive condition to the investment management transaction,’ Sanlam said.

Sanlam said the deal would enhance SIH’s position as one of South Africa’s largest black-owned asset managers.

The Absa Lisp business, which Glacier intends to acquire, had R66bn of assets under administration on 30 June 2021. Sanlam said that it expected Glacier to have assets under administration of about R350bn on the conclusion of the Lisp deal, making it one of the leading Lisp businesses in South Africa.

‘On completion of the respective transactions, SIH and Glacier will have access to the distribution network of Absa in addition to that of Sanlam, which significantly broadens their respective distribution reach,’ Sanlam said.

The initial term of the distribution agreement and the Lisp relationship agreement will be ten years, with a review on the third anniversary to allow for adjustments to enhance the agreements.

‘Each agreement will be renewable after the initial 10-year term,’ Sanlam said.

Absa will appoint a director to the SIH board for as long as it maintains a minimum shareholding.