In Summary
AAR Insurance created new shares and also ceded a portion of its stake to accommodate the two investors.
The deal values the company at about Sh2 billion.
Johannesburg Exchange-listed conglomerate AfroCentric has acquired a 12.29 per cent stake in the insurance unit of AAR Kenya, in a deal that values the company at about Sh2 billion.
Afrocentric, through its subsidiary Medscheme Holdings, teamed up with Zanele Investments Holdings, a local firm, to close the Sh245 million deal last month.
AAR Insurance created new shares and also ceded a portion of its stake to accommodate the two investors.
"The institutional investors took a 12.29 per cent stake in AAR Insurance," said Geoffrey Nzau, the insurance firm’s CEO. "The money will be used to expand our operations in the region," he added.
AAR has a separate healthcare division which has also attracted co-investors, including Swedfund and the International Finance Corporation (IFC).
AfroCentric is a diversified investment holding company that is listed on the Johannesburg Stock Exchange’s healthcare sector.
It owns Medscheme Holdings, said to be the largest private healthcare provider in South Africa covering about 3.2 million people. The scheme also operates in Namibia, Botswana, Swaziland and Zimbabwe.
Apart from medicare, Afrocentric has interests in electronics, mining and communication industries.
The acquisition signals increased deal-making in the local insurance market, with buyers seeking to ride on existing operations to grow their business.
Britam is set to complete its 99 per cent acquisition of Real Insurance in a stock-and-cash deal worth Sh1.3 billion.
Frankfurt-based African Development Corporation (ADC) is also scouting for a buyer of its 38.74 per cent stake in Resolution Insurance as it divests to focus on the banking sector.
For Afrocentric, the acquisition of AAR Insurance has expanded its presence in the local healthcare and insurance business.
The South African firm in August teamed up with Mr Nzau to acquire the Kenyan unit of Alexander Forbes Healthcare, a medical insurance firm which previously operated as a medical insurance provider (MIP).
Alexander Forbes opted to sell the unit in the wake of new regulations that forced MIPs to either convert into fully-fledged insurers, insurance brokers, or medical service providers under the Ministry of Health.
READ: Alexander Forbes eyes lucrative property market
The MIPs were operating as insurers and insurance brokers, taking premiums for the less risky outpatient services and reinsuring the risky in-patient business with local insurers.
The Afrocentric consortium rebranded Alexander Forbes Healthcare into AfroCentric Health Solutions which now offers medical insurance, joining a competitive market to rival players such as Resolution, Jubilee, and CIC.
The company offers insurance services, health and wellness management and related actuarial services to companies and individuals.
Its acquisition of a minority stake in AAR Insurance signals its increased interest in the local medical insurance business that is seen thriving on increased spend by companies and middle class households.
For AAR, sale of a minority stake to the Afrocentric consortium is in line with the company’s ongoing restructuring.
AAR recently split its operations into AAR Insurance and AAR Healthcare in a bid to diversify its patient base away from its insurance policy holders. The strategy is also meant to help the company expand its healthcare facilities including clinics in the region.
AAR plans to offer more health services such as specialist consultation, imaging and diagnostics. It is also set to acquire stakes in hospitals which could act as referral points for its outpatient customers.
The medical group currently operates 27 clinics in Kenya, Uganda and Tanzania and provides health insurance to some 190,000 clients.
It is this re-organisation that attracted new investors to the company’s healthcare arm (AAR Health Care Holdings), with IFC that injecting $4 million (Sh348 million) last year for an undisclosed stake.
Source Source Business Daily Africa
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