Aon Corp. will bid as much as $86 million to buy South African insurance firm Glenrand MIB Ltd., giving the world’s largest insurance broker a bigger presence in Africa’s top economy.
The two companies said in a statement on Thursday that Aon would pay 200 cents per Glenrand ordinary share, or 495.8 million rand, representing a premium of 11 percent over Glenrand’s closing price on Wednesday.
An additional payment of up to 30 cents per share would be placed in an escrow account and paid out to shareholders, or returned to Aon, depending on the outcome of a current legal dispute involving Glenrand and another firm.
Aon will also pay 24 million rand to buy the shares held by Glenrand’s black investors, bringing the total bid to as much as 594 million rand ($86 million).
Glenrand focuses on short-term insurance. Aon, which has offices in 12 African countries, said the combined entity will own 18 branches in South Africa and improve service to existing Aon clients.
If the bid is successful, Glenrand will become a full subsidiary of Aon and delisted from the Johannesburg exchange.
Unlike developed markets, insurance is seen as having a big growth potential in Africa as rising disposable incomes and a growing middle class translate into greater demand for vehicle, home and life coverage.
South African insurer Sanlam (SLMJ.J) has plans to invest 18 to 20 percent of its excess capital on building its African presence through acquisitions and partnerships.
The head of German reinsurer Munich Re’s (MUVGn.DE) African business told Reuters in June he expected to boost the volume of insurance premiums by 30 percent in the next three to four years.
Shares of Glenrand jumped 6.7 percent to 192 cents as of 1036 GMT, versus a slight decline in Johannesburg’s All-share index.
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