The 108-year-old South African insurer that gained R8.75 billion in one day

Following the announcement that Sanlam is looking to acquire 100% of Santam, the short-term insurance giant’s share price skyrocketed.

Santam’s shares gained 19.06% on Monday, 5 October, which added R8.75 billion to its market capitalisation on the JSE, increasing it to R54.67 billion.

Sanlam and Santam are both forces to be reckoned with in the local insurance market, finding themselves among the biggest and oldest in their respective fields.

Sanlam is the largest non-banking financial services group, while Santam is the country’s biggest short-term and general insurer.

Both companies were founded in 1918 and have operated as separate entities since then. However, since 1954, Sanlam has held a roughly 60% interest in Santam.

Now, Sanlam wants to acquire all the remaining shares in Santam through its subsidiary, Sanlam Life.

Sanlam is offering existing Santam shareholders R505 per share, significantly higher than its close on Friday, 2 October, when the share price was R399.75.

Following the announcement of the proposed acquisition, Santam’s share price skyrocketed, peaking at R484.00. It ended the day up 19.06%, to R475.00, but remained below Sanlam’s offer price.

Veteran stockbroker and investment analyst David Shapiro said in a social media post that he believes Sanlam’s offer should have been higher.

He pointed out that an investor who invested R100 in Sanlam ten years ago would now have R200.76. 

In contrast, R100 invested in Santam ten years ago would now be worth R277.47, excluding the spike seen after the announcement.

This implies a 7.20% return from Sanlam and a 10.73% from Santam.

“Sanlam is offering R505. My view is that it should be around R550 – 38% premium,” Shapiro said.

He explained that Santam has years of strong performance to draw on, which is a good indication of consistency, and that it is a “gem” he has been watching for decades.

Regardless of the offer price, Santam’s share price skyrocketed after the deal was announced, closing Monday at R475.00 per share.