Sanlam’s R15 billion BEE bonanza and Motsepe’s R8 billion

Patrice Motsepe is ‘walking away’ with about R8 billion from the Sanlam black economic empowerment ((BEE) deal.

The financial services giant, Sanlam, announced today that its BEE deal, struck in 2003, has matured and has delivered R15 billion in value due to its BEE partners, Ubuntu-Botho. The R15 billion figure emerges after the settlement of all debt and interest on the debt.

The Ubuntu-Botho consortium was led into the Sanlam deal by the super wealthy Motsepe in 2003. Back then Ubuntu-Botho was introduced as a broad based black economic empowerment (BBBEE) entity but with 55% control by Motsepe.

Sanlam BBBEE Structure uBuntu Botho

Structure of the Sanlam/Ubuntu-Botho transaction as presented at the establishment of the deal in 2003.

The dollar billionaire, Motsepe, entered the deal via an entity called Sizanani Thusanang-Helpmekaar. This is the entity which paid in R200 million equity contribution into the transaction. The rest was financed through complex debt structures.

In addition to the 55% Sizanani Thusanang-Helpmekaar stake, Ubuntu-Botho also featured the Sanlam Ubuntu-Botho Community Development Trust with 20% stake. The remaining 25% was to be allocated to a broad based grouping, individuals and groups.

In today’s announcement Sanlam characterised the outcome of the deal as “arguably one of the most successful transactions of its kind in South African history”.

The group said the initial 10-year contractual period of the transaction ended, with a final total of 66,5 million Deferred shares qualifying for conversion to ordinary shares. “The deal, one of the most far-reaching black empowerment transactions, created value of about R15 billion after the settlement of all debt and interest on the debt”

“At the end of December 2013 the 10-year debt had been settled and 66,5 million of the deferred shares issued to Ubuntu-Botho qualified for reclassification into ordinary shares in terms of a value-add formula linked to new Sanlam business flows. This resulted in a total unencumbered holding of 292,5 million Sanlam shares. The total value created was about R15 billion, which is attributable to the shareholders of Ubuntu-Botho.”

Sanlam added that “Underprivileged South Africans will also benefit from the transaction through the Sanlam Ubuntu-Botho Community Development Trust, which will advance and support community upliftment and development projects, BEE initiatives and corporate social investment programmes now that the loans of Ubuntu-Botho have been repaid.”

Samlam added that an agreement has been reached to extend the partnership with Ubuntu-Botho into the future.

“We are proud of the success of this transaction which we believe is a model for true broad-based economic empowerment and which has enabled us to secure significant long term growth opportunities for Sanlam as well as its shareholders,” said Sanlam CEO Johan Van Zyl.

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