Following regulatory approvals from the Prudential Authority and Competition Commission, black-owned and managed investment holding company Sithega has concluded its purchase of a 62% stake in Legal Expenses Group Africa (LEGA) from the founders for an undisclosed sum, with Hollard, South Africa’s largest privately-owned insurer, retaining the remaining 38% stake.
LEGA, founded in 1984 by Zak Crafford, owns legal expenses insurance brands LegalWise, Scorpion Legal Protection and micro insurer Family Insurance. The LEGA group collected about R800m in gross premium income for the year to end-June 2023 and has around 1,000 employees across SA, Botswana and Namibia.
The deal enables Sithega to realise its strategic ambition to enter the local insurance sector while meeting Hollard's mandate to encourage greater participation from black entrepreneurs as owners in South Africa’s financial services sector.
The acquisition, financed by the Institutional Finance team at Investec, unlocks synergies for all parties.
Focused on non-banking financial institutions, the Investec Institutional Finance team has expertise in providing debt funding solutions to suit their clients strategic, operational and growth initiatives in a complex and highly regulated environment.
“The LEGA deal is another transaction through which we are supporting our clients in achieving their strategic growth and transformational goals,” comments Shaun Timm, Senior Consultant in the Institutional Finance team at Investec.
Head of the Institutional Finance Team, Melissa Bilsland, commented further by saying “We are proud to be associated with a transaction like this, where our clients are seeking to make a real difference in the lives of South Africans, especially in the context of our current economic environment.”
Sithega was co-founded by African Bank chair Thabo Dloti and Khaya Ntozini, the former MD of Old Mutual's Mass and Foundation Cluster, focusing on asset management and insurance. Yellowwoods Capital is an anchor investor in Sithega, along with Stellar Capital.
Sithega invests in non-banking financial services businesses that are disrupting and transforming the industry through the latest technology, data usage and unique home-grown expertise, seeking potential investee businesses that are looking for a step change in their growth trajectory and aspirations.
In comments made to Business Day, Dloti explained that the transaction aims to “make a real difference in the lives of average South Africans, looking for real solutions beyond just another legal or funeral product.” He also went on to say that he “found the Investec team to be very responsive and innovative in putting together an appropriate funding arrangement to conclude this transaction. We appreciate the effort they have put into getting this deal done and look forward to growing our partnership as we seek to realise our vision for LEGA”
Business Day quoted Dloti as saying: “The journey we have walked with the LEGA team in concluding this transaction has affirmed our belief that end-to-end, simple-to-use insurance solutions make a difference.”
The deal builds on previous transactions Sithega concluded in April 2019 and June 2023 that saw Sithega acquire a controlling stake in Prescient Holdings.
Prescient is an asset management business offering services including investment management, stock broking, retirement solutions, fund services and administration in South Africa and other markets.
The LEGA deal marks the next step in Sithega's growth strategy aimed at building a financial services business that spans life and short-term insurance and asset management by making carefully identified and meaningful investments in innovative non-banking financial services businesses.