21 September 2011
South African financial services group Sanlam is to acquire a 26% stake in its Indian partner Shriram Capital for R1.9-billion, as part of of its strategy to to diversify both geographically and into broader financial services.
Shriram Capital’s activities include commercial financing, retail financing, distributing wealth products and stock broking. It also has a majority holding in each of the life and general insurance joint ventures with Sanlam.
“In terms of the agreement with Shriram, Sanlam will subscribe for an effective 26% interest in Shriram Capital through a cash contribution of R1.9-billion, while Sanlam’s 26% interest in both Shriram Life Insurance and Shriram General Insurance will also be transferred to Shriram Capital,” Business Day quoted Sanlam Group CEO Johan van Zyl as saying.
Van Zyl explained that a Sanlam investment in Shriram Capital better aligned the group’s interest with that of their Indian partner, and provided Sanlam with access to the strong growth and profit generating capacity of the financing entities.
“This investment is in line with the company’s strategy to diversify both geographically and into broader financial services,” he said in a statement last month.
“We are pleased to build on our already strong relationship with Shriram, which has developed through our involvement with the two insurance entities over the past five years.”
Van Zyl also reaffirmed that Sanlam was investigating a number of opportunities for expansion in Africa and that the potential for expansion into South East Asia would also be considered.
This includes potential consolidation in some markets as well as expansion into new countries, with Mozambique likely to be added in 2011.
The transaction, which is still subject to approval from the various regulatory authorities, is seen as a way for Sanlam to more efficiently utilise its discretionary capital of R3.2-billion.
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