Momentum Metropolitan has entered into a binding agreement to acquire Alexander Forbes' Short-term Insurance business.
Momentum issued a statement on Thursday afternoon announcing the pending acquisition.
Fin24 previously reported that Alexander Forbes has been seeking a buyer for its insurance businesses.
The transaction will be implemented towards the end of 2019, subject to the approval of regulators. The base price proposed is R1.938bn and covers 100% of the shares of AFI, the IT which supports the business and trademarks of the business. Accounting for any other adjustments, the maximum final price could equate to R2.055bn
Momentum CEO Hillie Meyer said the group is embarking on the acquisition to "fast track growth" of its short-term insurance interests. "This transaction now makes the group a significant player in the short-term insurance market," Meyer added.
Momentum had already integrated another short-term business into the group - Guardrisk which was acquired in 2014.
In a notice to shareholders, Momentum further explained that Alexander Forbers Short-term Insurance (AFI) is a "well-run" business with a "stable and experienced" management team. "We believe that there is a strong cultural fit with the broader Momentum Metropolitan business," the notice read.
The group plans to integrate AFI with the Momentum Short-term Insurance business, to form a retail short-term insurance unit that will trade under the Momentum brand, using one insurance licence.
Alexander Forbes issued its own notice to its shareholders indicating that the group attracted interest from both local and international potential buyers.
"The board is confident that the proposed transaction not only benefits Alexander Forbes, through the realisation of value for shareholders, but also balances appropriate solutions for clients and protects and values the employees of the business," the notice read.
"We have selected a company (Momentum) that understands the value proposition provided to our clients and will continue to invest in enhancing it," Alexander Forbes CEO Dawie de Villiers said.
Alexander Forbes is embarking on a business strategy which focuses more on consulting, administration and investments.