Market watchers have cited fears of reduced competition out of Ninety One’s proposed R5bn acquisition of Sanlam Investment Management (SIM), while the two companies described it as a win-win for the industry and a vote of confidence in South Africa as an investment destination.
The deal, announced this week, is subject to approval from competition regulators in South Africa and jurisdictions where Ninety One operates. It will result in Ninety One, formerly Investec Asset Management, increasing assets under management by R400bn. In turn, Sanlam will receive a 12.3% stake in Ninety-One.
Ninety One founder and CEO Hendrik du Toit told journalists: “Yes, and ultimately, at a time when we look at Ninety One structure, we are a predominantly international firm with a big South African footprint and origin. And we've decided to make an investment back into the country. And I think that ought to be appreciated,” Du Toit said.
Ninety One manages R3-trillion in assets.
Hanratty, whose contract was extended to the end of 2027, said in the last few years Sanlam had moved from the sixth ranked asset manager in South Africa by size to a top-two player.
Competition authorities need to block the transaction as it will effectively make it difficult for truly broad-based black-owned and managed asset management firms to compete
— Radebe Sipamla of Mergence Investment Managers
He said while Sanlam's strength was built on South African asset management, it had looked to grow its international asset management footprint.
“We reviewed more than 200 global asset managers and arrived at the view that Ninety One would be our preferred partner. We also believe it is a global business. Managing your international assets separately from the South African assets makes sense.” Sanlam viewed Ninety One as a leader in asset management in South Africa and the only one that offered global capabilities.
However, Andrew Bahlmann, CEO of corporate and advisory at Deal Leaders International, said there was concern that a merger between two of the largest asset managers could reduce the competitive dynamics in an already concentrated market.
“The Competition Commission will almost certainly investigate and if it intervenes it could delay or halt the deal, particularly if it believes that the merger would result in anticompetitive outcomes or higher fees for consumers,” he said.
Bahlmann said though both companies have complementary strengths — Ninety One with its investment culture and Sanlam with its distribution network — integration of these entities could face challenges in aligning corporate cultures, especially as Sanlam struggled to manage its portfolios when it acquired Absa Investment Management Services in 2016.
“The success of this deal will depend on how well Ninety One's investment philosophy meshes with Sanlam's operational structure,” he said.
Radebe Sipamla, a senior investment analyst at Mergence Investment Managers, described the transaction as “not positive” and suggested it should be blocked by the regulators.
“Competition authorities need to block the transaction as it will effectively make it difficult for truly broad-based black-owned and managed asset management firms to compete with scale efficiencies that the new entity will have. The transaction also favours incumbents that have been dominant players in the industry for decades to sustain their market share levels and leave low margin pockets of the sector for black asset managers to manage,” he said.
“We may likely see a scenario play out where Sanlam eventually gains control of Ninety One and fully merges the two businesses, [creating] an emerging market giant with meaningful market shares in both asset management and insurance. This would then make Sanlam a very attractive target for Allianz, which is in a joint venture with Sanlam in the rest of Africa, to gain control of Sanlam ... and create immense value for current Sanlam shareholders.”
Ninety One's closing assets under management increased by 1% in the six months ended September to £127.4bn. On Thursday, Investec said funds under management in Southern Africa increased by 11.9% to £23.4bn, driven by net inflows in its discretionary and annuity funds of R10bn and increased market levels.
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