South African insurer Old Mutual said on Wednesday it would distribute $734 million in shares in lender Nedbank among its shareholders, reducing its stake in the bank to 7.2% from 19.4%.
The insurer once held a more than 50% stake in the lender, one of South Africa’s big four banks, but sold off most of that in 2018 in a drive to simplify its conglomerate structure.
It said on Wednesday that while it had made sense to retain a minority stake in the bank, the Old Mutual board believed it was now in the best interests of shareholders to distribute the shares.
This simplifies the Old Mutual group and “provides a substantial return of capital to shareholders,” it said in a statement issued after the market close.
The 62.13 million Nedbank shares, worth around 10.4 billion rand ($734 million) based on Nedbank’s closing share price of 167.67 rand, represent around 12.2% of Nedbank’s issued share capital.
For every 100 Old Mutual shares they own, investors will get just under 1.32 Nedbank shares, the insurer said.
Nedbank said the move would increase its proportion of shares freely tradeable on the stock market.
“Any existing commercial relationships with Old Mutual will continue to be underpinned by arms-length commercial agreements,” Nedbank said.
($1 = 14.1756 rand) (Reporting by Emma Rumney Editing by Promit Mukherjee and Mark Potter)