Old Mutual to split assets, reduce stake in Nedbank

by Trust Matsilele 0

The international investment, savings, insurance, and banking group, Old Mutual, has reported a pre-tax adjusted operating profit rise of 11 per cent to GBP1.7 billion (R37.1 billion rand).

The assurer’s adjusted operating earnings per share grew 15 per cent to 19.3 pence (42 rand).

The group confirmed that it plans to split its assets to maximise value to shareholders over time. At 10:43am its share price traded 2 per cent lower at R40.11 on the news.

[Read Old Mutual considers splitting operations – rpt]

The four entities that will be separated to unlock value for shareholders are: Old Mutual Emerging Markets (OMEM), Nedbank, Old Mutual Wealth (OMW) and OM Asset Management (OMAM).

The company expects the separation to be materially completed by the end of 2018.

According to Old Mutual, these entities have benefited from significant investment and each has strong growth prospects in sizeable markets, with excellent competitive positions, strong balance sheets and rigorous governance.

Bruce Hemphill, Group Chief Executive, said the strategy sets out a bold new course to unlock value currently trapped within the group.

“We have four strong businesses that can reach their full potential by freeing them from the costs and constraints of the group,” he said.

“These businesses are performing strongly, have excellent competitive positions in sizeable markets and the underlying growth potential to flourish independently.”

Hemphill added that the new strategy will allow each business to have simpler access to capital markets to fund their growth more easily and be valued more appropriately.

The financial services group added that it would consider listing the entities that were not already listed and saw no point in holding a majority stake in Nedbank. It currently holds a 54.1 per cent stake. Nedbank’s share price was also down 2.43 per cent on the news to R176.61.

The financial services group said it “plans to reduce its interest in Nedbank to an appropriate strategic minority position to underpin the future commercial relationship”.

It added the exact mechanism to achieve any reduction in Old Mutual’s shareholding has yet to be finally determined.

One of the ideas it has considered however is “reducing its shareholding in Nedbank primarily by way of a distribution of Nedbank shares to the shareholders of Old Mutual in an orderly manner and at an appropriate time in the context of the managed separation and does not intend to sell any part of its shareholding in Nedbank to a new strategic investor. It is currently intended that, apart from the strategic minority shareholding in Nedbank to be held by Old Mutual, the remainder of the Nedbank shareholder base will be widely held by the time the managed separation has been completed.”

The company’s chairman, Patrick O’Sullivan, said after much careful thought, Old Mutual had taken the important decision that the best interests of shareholders will be served by enabling these businesses to chart independent courses over the medium term.

“We owe a considerable debt to the loyal staff whose efforts have shaped the evolution of the group. I am sure that they, customers and shareholders alike will recognise the logic behind our decision and can look forward to the opportunity to create long term-shareholder value in the next phase of the evolution of Old Mutual.”