Jubilee Holdings #ticker:JUB is selling majority stakes in its regional general insurance subsidiaries to German conglomerate Allianz SE for a total of Sh10.8 billion, marking one of the largest transactions in the industry in recent years.
Allianz will acquire controlling stakes of between 51 percent and 66 percent in Jubilee’s short-term or general insurance units in Kenya, Uganda, Tanzania, Burundi and Mauritius.
Jubilee Holdings will receive Sh7.75 billion while the rest will be invested in the operating businesses.
As part of the transaction, Allianz’s subsidiary in Kenya (Allianz Insurance Company of Kenya Limited) will be merged into Jubilee General Insurance Limited, which handles covers for fire, accident and theft.
Jubilee will retain significant stakes in the general insurance businesses in the deal expected to be concluded in the first quarter of 2021.
The Nairobi Securities Exchange-listed firm said the short-term underwriting units represent 12.3 percent of its aggregate net assets of Sh32.3 billion.
This means that Jubilee’s most valuable business is in life, pension and medical, which it will continue to own separately and are not part of the deal with Allianz.
“We are very pleased with this historic development for Jubilee Insurance,” the company’s chairman, Nizar Juma, said in a statement yesterday.
“Over the past decade, we have been approached by a number of international insurers looking to partner with Jubilee to expand into East Africa. With Allianz, we have now identified a partner whose strategic aims are aligned to Jubilee’s and whose expertise in the general insurance business is able to enhance the range and depth of products and risk management solutions that we can offer to our customers.”
Mr Juma said the company plans to reinvest the cash generated from the deal in its portfolio of privately held companies, adding that this will continue its strategy of lessening exposure to the volatile stock market.
He said other decisions, including whether or not the company will pay a special dividend, will be made later.
The transaction is, however, subject to regulatory approvals in the five markets as well as a restructuring of Jubilee’s subsidiaries in Uganda and Tanzania into separate general insurance units. The deal marks the latest high-profile transaction in the local insurance business that has seen the world’s biggest insurers buy into established firms with a regional presence.
New Jersey-based Prudential Financial Inc and private equity firm Leapfrog, for instance, recently acquired a 24.1 percent stake in ICEA Lion Insurance Holdings, owned by the Philip Ndegwa family, for Sh2.4 billion.
Zurich-based Swiss Re has also built up a 15.8 percent stake in Britam Holdings, spending billions of shillings to acquire stakes from the company’ founders, including Peter Munga and Jimnah Mbaru.
The deep-pocketed multinationals are seeking to expand in Africa, which is seen as presenting growth opportunities over the coming decades.