The decision in which Botswana Insurance Holding Limited (BIHL) intend to acquire 50 percent stake in a company which holds 100 percent of the ordinary shares in Botswana Insurance Company (BIC) will likely to be made in the new year. The firm targeted by BIHL is Teledimo (pty) Ltd - an investment vehicle that owns BIC. Following a public hearing on Monday on the proposed transaction, the parties together with the relevant stakeholders have been given 30 days to come up with all the materials or information that will determine if the deal is given a go ahead or rejected.The deal, if approved as requested by lawyers of both companies who presented the merits of the transaction before the Competition Authority (CA), will not result in management or structural changes as BIC will continue to operate independently.
Speaking on behalf of Teledimo, the lawyer representing the company argued that the transaction will not affect the other existing shareholders who are the citizens. Lawrence Khupe told the panel which was led CA Chief Executive Officer (CEO) Thula Kaira that 33 percent of Teledimo is in the hands of Batswana and therefore the status quo will remain if the deal is given a go ahead. Khupe argued that the proposed acquisition will not result in a monopoly as short-term insurance in Botswana is heavily regulated; hence the likelihood of uncompetitive behaviour will be non-existent. The acquisition of the portion in BIC by BIHL will not result with complete takeover of the entire market share. Zeyn Bhyat of ENSAfrica, a law firm which appeared on behalf of BIHL, said even if the deal goes through, it will not result in uncompetitive behaviour. The deal, according to Khupe, will still provide scope for competition as the short term industry is said to be robust.
It is believed that the shareholders of BIC will benefit from the economics of scale as BIHL is a listed entity on the Botswana Stock Exchange (BSE). It appears BIC has been on BIHL’s radar for quite some time now. BIHL’s interest in BIC signals its return to the short term industry after selling its General Lines Insurance Book to the same company a year ago.
BIHL sold the general lines insurance book, citing unsatisfactory performance of the short term insurance. The relationship between the two companies is traced far back as the two used to exist as a single company before they split. They both celebrated 40 years anniversary this year. The two companies have ever since enjoyed a cordial relationship as evidenced by the selling of the general insurance lines book, a transaction valued at P6 million.
BIHL CEO Gaffar Hassam has previously said selling its short term insurance did not signal departure from the short term insurance industry. During the period of the transaction, Hassam was non-committal whether BIHL was on verge of acquiring BIC instead choosing to say he cannot rule out anything. BIHL’s portfolio includes the Botswana Life, Botswana Insurance Fund Management (BIFM) and Legal Guard.