Ninety One to add R400bn in assets in mega deal with Sanlam

SA’s largest money manager, Ninety One, is poised to solidify its market-leading position with a proposed acquisition of Sanlam Investment Management (SIM) for about R5bn.

If the deal clears regulatory scrutiny, it will provide access to R400bn in new assets under management (AUM).

The deal, announced on Wednesday, will see Ninety One AUM hit the R3.3-trillion mark at a when time industry leaders expect consolidation in the sector to ramp up.

Ninety One founder and CEO Hendrik du Toit said authorities should view the deal as the group reinvesting in SA — a sign of confidence in the economy. He said small asset managers still had a role to play in the SA asset management industry, and it was important to ensure they were not pushed aside.

“SA is very fortunate when compared to other emerging markets to have a competent and very competitive asset management industry. That should not be lost. We should not go the route of the banks where we have just big six banks. We should have leading firms that can compete internationally, but keep a vibrant boutique sector,” Du Toit said.

“We shouldn’t drive the smaller guys, most of whom are very competent in the industry, out of the sector. But there is definite need for market leaders. Ours is a desire to signal very clearly that we don’t only want to maintain but bolster our market leadership.

“We don’t want to be only the market leader in SA, but also in the emerging market, and a competent competitor in global assets,” he said.

A deal between Ninety One and SA’s largest non-banking group would see the acquisition of all the issued shares in SIM, an investment management business wholly owned by Sanlam Investment Holdings, in which the Sanlam Group holds an effective 65.6% interest. After implementation, SIM would become a wholly owned subsidiary of Ninety One.

Anchor investor

In addition, Sanlam would appoint Ninety One as the permanent investment manager to manage assets for Sanlam Investments UK, a wholly owned unit of the Sanlam Group. 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 transaction, the Sanlam Group will receive an equity stake of about 12.3% in Ninety One through a combination of Ninety One Ltd and Ninety One Plc shares, thereby establishing the Sanlam Group as a long-term shareholder of Ninety One.

Business Day reported on Tuesday that the CEOs of Coronation and Stanlib believed conditions were ripe for consolidation in the industry, as rising costs and limited savings and investment resources hindered smaller players. Coincidentally, the last big merger in the industry saw Sanlam and Absa merge their investment businesses, creating an asset manager with R1-trillion in assets, with the lion’s share of this now set to be housed under Ninety One.

Asief Mohamed, chief investment officer of Aeon Investment Management, said the Ninety One and Sanlam deal took him by surprise, but he expected more merger & acquisition activity in the industry.

“It was widely expected that consolidation would occur among smaller, less established asset managers. A similar deal was proposed between Coronation and Metropolitan Asset Managers more than 20 years ago, but it was abandoned due to disagreements over profit-sharing arrangements between the acquirer’s investment staff for the consolidated entity,” Mohamed said.

“Given these circumstances, Coronation may be well positioned to pursue a similar transaction with Old Mutual to that of Ninety One and SIM. One expects further consolidation in a shrinking retirement savings market,” he said.

Sanlam CEO Paul Hanratty said that by leveraging its complementary competencies, Sanlam Investments would strengthen its SA and global position as a “multi-skilled asset manager” .

Du Toit expected the deal to clear regulatory hurdles. “We have been competing against international companies. They come in and don’t really have large businesses in SA. They simply come and take the money away. We want to give these players a run for their money.

“The competition authorities should think of us in terms of how do we keep the industry domesticated so that we stand our ground. The proposed deal should be seen as a substantial vote of confidence in SA and good for the ecosystem. The way I see is that we have won a big mandate, not that we went to buy someone’s business,” he said.

Update: November 20 2024
This story has been updated with new information throughout.

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