REG - Ninety One PLC - Long-term active asset management relationship

Ninety OneAnnouncement

20/11/2024 07:15

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RNS Number : 8743M  Ninety One PLC  20 November 2024

NINETY ONE LIMITED

(Incorporated in the Republic of South Africa)

(Registration number: 2019/526481/06)

JSE Share Code: NY1

ISIN: ZAE000282356

 

NINETY ONE PLC

(Incorporated in England and Wales)

(Registration number: 12245293)

LSE Share Code: N91

JSE Share Code: N91

ISIN: GB00BJHPLV88

LEI: 549300G0TJCT3K15ZG14

 

SANLAM LIMITED

(Incorporated in the Republic of South Africa)

(Registration number: 1959/001562/06)

JSE & A2X Share Code: SLM; NSX Share Code: SLA

ISIN: ZAE000070660

("Sanlam" or "Sanlam Group")

 

SANLAM LIFE INSURANCE LIMITED

(Incorporated in the Republic of South Africa)

(Registration number: 1998/021121/06)

LEI: 378900E10332DF012A23

Bond Issuer Code: BISLI

("Sanlam Life")

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AND IS FOR IMMEDIATE RELEASE

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE
A VIOLATION OF THE RELEVANT LAWS OF THAT JURISDICTION

 

 

JOINT ANNOUNCEMENT REGARDING THE CREATION OF A LONG-TERM ACTIVE ASSET
MANAGEMENT RELATIONSHIP BETWEEN SANLAM AND NINETY ONE

 

Sanlam and Ninety One (the dual-listed company consisting of Ninety One plc
and Ninety One Limited) have entered into a binding Framework Agreement
("FWA"). Under the terms of the FWA, the parties have agreed to establish a
long-term relationship whereby Sanlam will appoint Ninety One as its primary
active investment manager for single-managed local and global products
("Proposed Transaction").

 

As part of the Proposed Transaction, Ninety One will acquire all the issued
shares in Sanlam Investment Management Proprietary Limited ("SIM") 1  (#_ftn1)
, an active investment management business wholly owned by Sanlam Investment
Holdings Limited ("SIH"), in which the Sanlam Group holds an effective 65.6%
interest. In addition, Sanlam will appoint Ninety One as the permanent
investment manager to manage assets for Sanlam Investments UK Limited ("SI
UK"), a wholly owned subsidiary of the Sanlam Group. Furthermore, Sanlam will
serve as an anchor investor in Ninety One's international private and
specialist credit strategies that meet its investment requirements.

 

As consideration for the Proposed Transaction, the Sanlam Group will receive
an approximate 12.3% equity stake in Ninety One through a combination of
Ninety One Limited and Ninety One plc shares, thereby establishing the Sanlam
Group as a long-term shareholder of Ninety One.

 

1.    BACKGROUND TO THE PARTIES AND RATIONALE FOR THE PROPOSED TRANSACTION

 

1.1.  Ninety One:

Ninety One, established in 1991 in South Africa, is an active investment
manager for third-party clients. From its emerging market origins, the firm
has built a global presence. Ninety One is listed on the London and
Johannesburg Stock Exchanges. Over the years, Ninety One has built substantial
relationships with many of South Africa's leading financial institutions.

 

The Proposed Transaction strengthens the relationship with Sanlam. Ninety One
will gain preferred access to Sanlam's distribution network, expanding its
market reach through Sanlam's established channels and into savings pools
outside the normal reach of the Ninety One brand. Furthermore, anchor
investment will be provided for Ninety One to accelerate the expansion of its
international private credit offerings. This relationship enables Ninety One
to bolster its South African market leadership and reinforces its ability to
deliver outcomes that benefit clients over the long term.

 

Hendrik du Toit, Ninety One Founder and Chief Executive Officer, commented:

"We are looking forward to a long and fruitful relationship with Sanlam, a
business with a powerful brand and significant scale in South Africa. Our
experience and expertise are complementary. This agreement will give us the
opportunity, as leaders in our respective markets, to create additional value
for our stakeholders. We are making a substantial investment in the future of
South Africa."

 

1.2.  Sanlam:

Founded in 1918, Sanlam is the largest non-banking financial services group in
Africa and is listed on the Johannesburg Stock Exchange 2  (#_ftn2) , Namibian
Stock Exchange and A2X Markets Limited. Sanlam operates in 31 countries,
including eight of the top ten largest African economies. Sanlam offers a wide
range of financial solutions, including life and general insurance, health,
financial planning, retirement, investments, wealth management and credit, to
institutional and retail clients. As a leading player in the non-banking
financial services sector, Sanlam has built an extensive distribution network
within the South African market, delivering solutions to a diverse client
base.

 

The Proposed Transaction with Ninety One supports Sanlam's strategy to
strengthen its position in South Africa. Sanlam has a complete range of
investment capabilities to ensure that assets can be managed optimally on
behalf of clients and shareholders. As a core building block of its investment
solutions, Sanlam's active asset management capability will be strengthened by
this arrangement. Over time, Sanlam anticipates that Ninety One's investment
culture and research processes will further enhance the competence of the
current Sanlam teams, enabling them to deliver even better outcomes for
clients.

Sanlam purposefully selected Ninety One after identifying them as the
pre-eminent South African active asset manager. A key factor in this decision
was Ninety One's integrated approach to managing South African and offshore
assets, reflecting the demands of an increasingly global industry. With a
shared long-term philosophy and commitment to positive impact, Sanlam and
Ninety One aim to forge a long-term relationship based on mutual trust,
designed to unlock opportunities and optimise outcomes for shareholders and
clients alike. Additionally, Sanlam has chosen to act as an anchor investor in
Ninety One's international private credit strategies. This strategic move
complements Sanlam's own private credit initiatives and addresses its
long-term need for high-quality private credit assets, positioning the group
to meet growing market demand effectively.

 

Paul Hanratty, Sanlam Group Chief Executive Officer, commented:

"Sanlam is pleased to partner with a like-minded business with a shared South
African heritage, proven global expertise and a reputable brand. By leveraging
our complementary competencies, Sanlam Investments will be strengthening its
South African and global position as a multi-skilled asset manager. Coupled
with Sanlam Investments' market-leading expertise in passive and alternative
asset classes, as well as multi-managed solutions, the relationship is set to
unlock value for its clients, distribution force and shareholders."

 

2.    OVERVIEW OF THE PROPOSED TRANSACTION

 

The FWA includes the following key terms:

·    Sale of SIM: SIH will dispose of its entire shareholding in SIM to
Ninety One, delivering SIM as a clean legal entity, inclusive of all SIM's
active assets under management ("AUM"), associated revenue streams, and
investment professionals, preserving the entity's operational continuity.

·    Investment Management Agreement ("IMA") for SI UK assets: Ninety One
will be appointed as the permanent investment manager for specific SI UK
in-scope AUM. To facilitate Ninety One's management of the in-scope SI UK
assets, the associated SI UK investment professionals responsible for these
assets will transition to Ninety One.

·    Execution of various operative agreements ("Operative Agreements"):
The Operative Agreements will comprise a 15-year relationship agreement as
well as transaction agreements to formalise the arrangement between the
parties.

 

Prior to implementing the sale of SIM, SIH will be responsible for a
reorganisation of SIM to transfer out all business activities and associated
costs not forming part of the active asset management business. Only
investment professionals responsible for the management of assets will be
retained in SIM and all other costs relating to the business will be
transferred to other entities within the Sanlam Investments cluster.

 

3.    TRANSACTION CONSIDERATION

 

The parties have agreed that the purchase consideration for the Proposed
Transaction will be settled by the issue of a fixed number of Ninety One
shares. This equates to approximately a 12.3% shareholding in Ninety One
(calculated on the day prior to this announcement), with Sanlam Group holding
an effective shareholding of approximately 9.2% in Ninety One when excluding
ARC Financial Services Investments Proprietary Limited and Absa Financial
Services Limited as indirect minority shareholders in SIH.

 

4.    FINANCIAL INFORMATION

 

The in-scope SIM and SI UK AUM amount to approximately R400 billion
(approximately GBP17 billion) as of 30 September 2024, with approximately 80%
currently being managed in South Africa. For Sanlam, the Proposed Transaction
is anticipated to be slightly earnings and dividend dilutive in the initial
years. However, the Proposed Transaction is expected to become earnings
accretive from year three onward as the strategic benefits begin to
materialise.

 

Accordingly, the Proposed Transaction will increase Ninety One's AUM by
approximately GBP17 billion by reference to 30 September 2024. For Ninety One,
the Proposed Transaction is anticipated to be earnings and dividend accretive
from inception.

 

The value of the net assets that are the subject of the Proposed Transaction
and the profits attributable thereto, will be finalised as part of the
Operative Agreements referred to above. A further announcement will be
released by Ninety One to its shareholders at an appropriate time, once
finalised.

 

5.    MATERIAL TERMS AND CONDITIONS PRECEDENT

 

The longstop date for the finalisation and execution of the Operative
Agreements is 31 March 2025. The effective date of the Proposed Transaction
will be dependent on the fulfilment of the suspensive conditions to the
Operative Agreements.

 

The Operative Agreements will provide for customary warranties, indemnities,
interim period undertakings and termination mechanisms that are normal for a
transaction of this nature, including the obtaining of the necessary approvals
from shareholders and the regulatory authorities in South Africa, the United
Kingdom and any other applicable jurisdiction.

 

6.    CATEGORISATION OF THE PROPOSED TRANSACTION

 

In accordance with Section 9 of the JSE Listings Requirements, the Proposed
Transaction falls below the Category 2 threshold for Sanlam. As such, this
announcement is made on a voluntary basis and no Sanlam shareholder approvals
are required.

 

For Ninety One, the Proposed Transaction qualifies as a Category 2 transaction
under Section 9 of the JSE Listings Requirements. Given the issuance of shares
required as part of the Proposed Transaction, shareholder approval from both
Ninety One Limited and Ninety One plc shareholders is necessary and will be
sought in due course following execution of the Operative Agreements. Ninety
One shareholders will be kept informed in this regard.

 

7.    INVESTOR AND ANALYST CONFERENCE CALL

 

Separate conference calls for analysts and investors will be held today, 20
November 2024.

 

Ninety One will host a webcast at 09:00 (UK time). Those wishing to
participate should navigate to https://ninetyone.com/interim-results-webcast
(https://ninetyone.com/interim-results-webcast) for a registration link to the
webcast.

 

The Sanlam webcast will take place at 17:00 (South African time). Those
wishing to participate should navigate to
https://my.100.lumiconnect.com/r/participant/live-meeting/100-172-033-036
(https://my.100.lumiconnect.com/r/participant/live-meeting/100-172-033-036) .

 

Access details for each call are also available on the companies' websites.

 

 

20 November 2024

 

Ninety One Enquiries:

Ninety One Investor Relations

ir@ninetyone.com

 

Ninety One Public Relations:

Kotie Basson (for South Africa)

kotie.basson@ninetyone.com

+27 (0) 82 375 1317

 

The person responsible for arranging the release of this announcement on
behalf of Ninety One is Amina Rasool, Company Secretary.

This announcement is being released simultaneously on the LSE and JSE in
accordance with the rules applicable to dual listed company structures and
will be made available on the Ninety One website at www.ninetyone.com.

 

JSE Sponsor to Ninety One:

J.P. Morgan Equities South Africa (Pty) Ltd

 

Financial Advisor to Ninety One:

Rothschild & Co South Africa (Pty) Ltd

 

Legal Advisors to Ninety One:

Edward Nathan Sonnenbergs Inc.

Linklaters LLP

 

Sanlam Enquiries:

Sanlam Investor Relations

ir@sanlam.co.za

 

JSE Equity Sponsor to Sanlam Limited:

The Standard Bank of South Africa Limited

 

JSE Debt Sponsor to Sanlam Life Insurance Limited:

The Standard Bank of South Africa Limited

 

NSX sponsor to Sanlam Ltd:

Simonis Storm Securities (Pty) Ltd

 

Legal Advisors to Sanlam:

Webber Wentzel

Allen Overy Shearman Sterling LLP

 

Forward looking statements

 

This announcement, oral statements made regarding the Proposed Transaction,
and other information published by Ninety One (where it relates to Ninety One)
and/or Sanlam (where it relates to Sanlam) (jointly the "Parties") may contain
statements which are, or may be deemed to be, "forward-looking statements".
Forward-looking statements are prospective in nature and are not based on
historical facts, but rather on current expectations and projections of the
respective management of the Parties about future events, and are therefore
subject to risks and uncertainties which could cause actual results to differ
materially from the future results expressed or implied by the forward-looking
statements. The forward-looking statements contained in this announcement
include statements relating to the expected effects of the Proposed
Transaction for the Parties, the expected timing and scope of the Proposed
Transaction and other statements other than historical facts. Often, but not
always, forward-looking statements can be identified by the use of
forward-looking words such as "plans", "expects" or "does not expect", "is
expected", "is subject to", "budget", "scheduled", "estimates", "forecasts",
"intends", "anticipates" or "does not anticipate", or "believes", or
variations of such words and phrases or statements that certain actions,
events or results "may", "could", "should", "would", "might" or "will" be
taken, occur or be achieved. Although the Parties believe that the
expectations reflected in such forward-looking statements are reasonable, the
Parties can give no assurance that such expectations will prove to be correct.
By their nature, forward-looking statements involve risk and uncertainty
because they relate to events and depend on circumstances that will occur in
the future. There are a number of factors that could cause actual results and
developments to differ materially from those expressed or implied by such
forward-looking statements. Other unknown or unpredictable factors could cause
actual results to differ materially from those in the forward-looking
statements. Such forward-looking statements should therefore be construed in
the light of such factors. Neither the Parties nor any of their respective
associates or directors, officers or advisers, provides any representation,
assurance or guarantee that the occurrence of the events expressed or implied
in any forward-looking statements in this announcement will actually occur.
You are cautioned not to place undue reliance on these forward-looking
statements. Other than in accordance with their legal or regulatory
obligations (including under the UK Listing Rules, the JSE Listings
Requirements and the Disclosure and Transparency Rules of the FCA and/or
Chapter X of the Financial Markets Act in South Africa), the Parties are under
no obligation, and expressly disclaim any intention or obligation, to update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.

No statement in this announcement is intended as a profit forecast or profit
estimate.

 

No offer or solicitation

This announcement is not intended to, and does not constitute, or form part
of, any offer to sell or an invitation to purchase or subscribe for any
securities.

 1  (#_ftnref1) Following the implementation of the Proposed Transaction, SIM
will become a wholly owned subsidiary of Ninety One Limited and its memorandum
of incorporation will adhere to the provisions of Schedule 10 of the JSE
Listings Requirements.

 2  (#_ftnref2) A list of the top shareholders holding 5% or more is available
in the most recent Sanlam Integrated Report (as of 31 December 2023) available
on Sanlam's website (https://www.sanlam.com/).

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