| Thu 12 Feb 2004, 13:59 | | M&F confiscation' bid |
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M&F confiscation' bid
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Insurer's plan to get minority shares attacked
Financial Services Editor
A FRESH attack on Old Mutual's plan to "confiscate" the shares of Mutual & Federal (M&F)'s minority shareholders was launched yesterday by Roy McAlpine, a private shareholder, who for many years headed one of SA's largest fund managers, Liberty Asset Management.
As short-term insurer M&F reported a 44% increase in operating earnings to R780m for the year to December, McAlpine said that in 25 years of investing he had never seen a worse case of corporate raiding.
SA's constitution protected property rights, but the Companies Act did allow for confiscation, under certain conditions.
He claimed M&F parent Old Mutual was misusing that section of the act to bulldoze through a takeout of M&F minorities. "This is not fair play."
The takeout was prompted by UK group Royal & Sun Alliance's desire to sell its 37% of M&F. Royal & Sun has accepted an offer from Old Mutual, in effect enabling Old Mutual to do a compulsory takeout of the remaining 12% minority shareholding.
Old Mutual has offered R17,50 above what it is to pay Royal & Sun but still well below M&F's current market price of R18,50. Institutional investors Stanlib and Investec have already voiced strong objections to the offer's terms.
McAlpine said M&F was a superb company and the offer should be at a premium of at least 20% to the current market price.
A committee of independent M&F directors has retained advisers to do a fair and reasonable assessment of the offer. Old Mutual's head of investor relations, James Poole, said the group would wait to see this. He said, however, that the offer was at a fair premium to the price offered to Royal & Sun and on a price-tobook ratio did not seem unreasonable.
M&F yesterday reported net asset value had risen to R14,06 at end-December, from R12,07 a year before. Its underwriting surplus grew 193% to R340m last year as it benefited from a fall in weather-related claims amid unusually dry weather.
CE Bruce Campbell said dry weather meant lower claims on storm-water damage, for example, but motor vehicle accident claims also fell when it did not rain. Last year's lower claims experience was similar to that in 1997, also a drought year.
The claims total at M&F last year was down 7% to 428000, although total claims value rose by 10% because of some larger losses. These included some dramatic claims such as on the Sealand Express, a cargo ship that ran aground, as well as a fire at a Port Elizabeth hotel.
Campbell also said the number of claims on vehicles stolen and hijacked had remained largely unchanged, or had perhaps declined slightly, in the past two years. M&F's share of the market in SA and thus sample size are probably large enough for this to be extrapolated to reflect trends for the country as a whole.
M&F's gross premiums rose 16%, with personal lines accounting for 42% of gross premiums, commercial for 38% and corporate 22% strategically the right split, Campbell said. The insurer has for the past three years targeted commercial business for expansion. It saw a hefty increase in the underwriting surplus on commercial business last year.
Bottom Line: Page 12
Feb 12 2004 07:53:19:000AM Hilary Joffe Business Day 1st Edition
