11 July 2005

Sanlam takes major steps in optimising its capital base

Sanlam announced today that following the formal approval to dispose of at least 60% of Sanlam's 124 million shares in Absa, the Board proposes a reduction in surplus capital of approximately R4 billion. This will be effected through a simultaneous specific pro rata repurchase of shares from all shareholders and a voluntary offer to shareholders holding a small number of shares, followed by a share repurchase in the open market.

The Board, having taken cognisance of the future capital requirements of the group following an extensive modelling exercise, is of the opinion that Sanlam currently holds capital of some R7 billion in excess of its requirements. The proposal to utilise R4 billion for a repurchase of Sanlam shares forms an important part of the group's strategy to enhance the efficient utilisation of capital.

The specific pro rata share repurchase will be effected through a scheme of arrangement (the scheme) in terms of which all scheme participants will dispose of 10% of their Sanlam ordinary shares. The financial effect of the proposed Scheme will be a 1,3% increase in embedded value per share as well as an increase in the return on embedded value.

The price offered to shareholders for the specific pro rata 10% repurchase will be R12,00 per share.

Commenting on the share repurchase, Dr Johan Van Zyl, Group CEO of Sanlam said:

"The repurchase of 10% of Sanlam's shares provides the most effective way to utilise a large portion of our surplus capital, reduce concentration risk and return value to shareholders. This should be regarded as one step in a process aimed at improving capital efficiency. Sanlam will continue to seek additional opportunities to improve its return on embedded value through increased efficiency of capital utilisation as well as growth opportunities and we will keep stakeholders informed in this regard."

Following the implementation of the group's proposed specific pro rata share repurchase, the Sanlam Board is offering shareholders that hold less than 300 Sanlam ordinary shares after the implementation of the scheme, the opportunity to dispose of their entire shareholding (the offer).

Sanlam currently has approximately 650 000 shareholders on its register of which about 40% will hold less than 300 Sanlam shares if the proposed scheme is implemented.

The price offered to these shareholders will be equal to the volume weighted average market value of the Sanlam ordinary shares traded on the JSE for the five business days immediately preceding Friday 16 September 2005, plus a 20 cents per share premium. Shareholders who decide to take up the offer will not be required to pay transaction or other associated costs.

Van Zyl said, "A significant number of small shareholders did not increase or sell their initial shares allocation since our demutualisation and listing in 1998. The Sanlam Board is of the opinion that some of these shareholders may welcome the opportunity to sell their shares without having to pay any transaction or other associated costs, which could be significant relative to the return on less than 300 shares.

"We believe our offer to acquire these shares enables such shareholders with a relatively small shareholding in Sanlam an affordable exit strategy, but they are of course welcome to retain their shares should they so wish."

The scheme is subject to the approval of 75% of the votes exercised by scheme members at the scheme meeting and the approval of High Court. The offer is subject to the scheme becoming operative and the passing of a special resolution in the general meeting by shareholders.

The remaining R3 billion of excess capital is earmarked for profitable structural growth opportunities to support the group strategy of being a diversified financial service provider. A number of initiatives are currently being investigated. If suitable opportunities are not available to be realised within a reasonable time frame and on terms that will add value to Sanlam, the remaining excess will also be returned to shareholders.

All shareholders will receive a copy of a circular outlining the scheme and offer in more detail. This is expected to be mailed to all shareholders by Monday 22 August 2005. The proposed time frame allows for the publication of Sanlam's interim results on 8 September 2005 before shareholders are required to vote on the proposals.

Please click here for detailed announcement

Please note:

PDF documents are viewable using the Adobe® Acrobat Reader. You can download Acrobat Reader free of charge directly from Adobe (All platforms).