JSE-listed financial services group Clientèle Limited has entered an exchange-of-sales agreement to acquire 1Life Insurance Limited from Telesure Investment Holdings (TIH).
The deal will result in a combined embedded value of about R7.8 billion, more than twice Clientèle’s listed market value of R3.6bn, and almost 1.5 million contracts, Clientèle said in a SENS announcement on Friday.
The transaction is expected to close on 30 June 2024.
Clientèle will pay R1.914bn to acquire 1Life. The purchase price is equivalent to the embedded value of 1Life on 30 June 2023, plus a premium of 6.23%.
1Life had a net asset value of about R1.7bn, while its profit after tax was more than R152.7 million, according to its latest audited annual financial statements for the year to the end of June. During the same period, Clientelè made a profit of R488m.
Clientèle provides entry-level life insurance and funeral plan products to the mass market, and 1Life operates in the underwritten direct and intermediated life insurance market and the funeral mass market.
According to the SENS announcement, when 1Life started operations in 2006, it was South Africa’s first truly direct life insurer.
As part of the agreement, TIH or any of its related parties will not sell or underwrite any insurance products that compete with 1Life for five years after the closing date of the transaction unless it receives Clientèle’s written consent.
The purchase will be settled through the issuing of 117 815 756 ordinary shares in Clientèle (the consideration shares), which will be equal to 26% of Clientèle’s issued share capital, plus the consideration shares as at the date of the announcement (3 November). The consideration shares will be issued at R16.25 per share.
Clientèle’s material shareholders – Newshelf 702 (Pty) Ltd, River Lily Investments (Pty) Ltd, and the Hollard Group – have decided they will not vote on the resolution to approve the 1Life acquisition, the SENS announcement said. The three shareholders own about 80% of Clientèle’s issued share capital.
1Life’s chief executive, Laurence Hillman, said in a statement: “Both companies have strong complimentary broker, digital, and direct distribution channels with diverse product differentiation that can be used to enhance target market opportunities, resulting in incredible synergies and growth opportunities. This synergy provides a foundation for the development and delivery of even more innovative insurance products and services for which both organisations have become known.”
Clientèle’s chief executive, Basil Reekie said the 1Life and Clientèle brands will continue to operate in much the same way after the merger.
The agreement is subject to numerous conditions precedent, virtually of which must be fulfilled by the end of March 2024. These conditions include:
- Clientèle’s shareholders must have approved the transaction and have elected two people nominated by TIH to its board of directors.
- An outsourcing agreement between Telesure Group Services (Pty) Ltd and 1Life in 2019 must have been amended so that Telesure will continue to render outsourced services to Clientèle.
- TIH, 1Life, and Clientèle must have signed an agreement relating to whether TIH will be paid royalty fees for the use of software used by 1Life owned by TIH, or whether Clientèle will have the right to copy or extract the software code.
- The signing of an agreement in terms of which Clientèle and/or 1Life will pay TIH or Telesure certain reasonable costs based on the sales of 1Life policies by TIH tied agents.
- TIH, 1Life, and Clientèle must have signed an agreement governing the sharing of customer information and the use of branded trademarks.
- The signing of lock-in agreements with certain key employees.
