Financial services group Sanlam, and Absa banking group said Tuesday (5 October) that they have reached an agreement to combine their investment management businesses in a transaction which will result in an asset management company with assets under management, administration and advice in excess of R1 trillion.
The transaction will see Absa exchange its investment management business, Absa Investments, for a stake of up to 17.5% in Sanlam Investment Holdings Proprietary Limited (SIH). Absa Investments comprises Absa Asset Management, Absa Alternative Asset Management, Absa Fund Managers (excluding the Absa Prudential Money Market Fund) and Absa Multi Management.
SIH is Sanlam’s third-party asset management business in which ARC Financial Services Investments Proprietary Limited (ARCFS) is a shareholder. ARCFS currently has a 25% effective interest in SIH through its 25% shareholding in SIH’s holding company, with Sanlam owning the remaining 75%.
As part of the transaction, Satrix, a subsidiary of SIH, will acquire the exchange-traded funds (ETF) business of Absa’s NewFunds (excluding its commodity ETF business), and the intention is that Absa will enter into agreements to dispose of its market Linked Investment Services Provider (LISP) business to Glacier by Sanlam.
The conclusion of agreements to give effect to the LISP transaction is a suspensive condition to the investment management transaction.
Absa will also enter into a 10-year distribution agreement with SIH, meaning the expanded operations will utilise the distribution networks of both Sanlam and Absa, which significantly broadens market reach for the enlarged SIH.
The effective date of the transaction will depend on the fulfilment of certain suspensive conditions including regulatory approvals (such applications will be submitted to the relevant regulators in due course) and is expected to occur in the first half of 2022.