Old Mutual bides time on formal bid for Skandia
Stephen Gunnion
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Financial Services Editor
OLD Mutual is likely to release more details of its proposed bid to buy Swedish savings group Skandia within the next few days.
However, the group does not want to make a formal offer for Skandia until it has the approval of the Scandinavian groupÆs board.
In the meantime, Old MutualÆs rising share price is making the deal potentially more attractive for SkandiaÆs shareholders.
ôWhat we would like to do is to make a formal offer that has the boardÆs approval,ö James Poole, Old Mutual head of investor relations, said yesterday.
Poole said it was important to make ôfurther clarificationsö of the offer, particularly for smaller shareholders.
On Monday, Old Mutual said it had discussed an offer of 42 krona a share with SkandiaÆs board, valuing the group at 43-billion krona (about R37bn).
Skandia said at the time that it was waiting for a formal offer before it considered it.
The Skandia board is believed to be divided on the takeover issue, with some members preferring the firm to remain independent.
One analyst, who asked not to be named, said the board had already had an independent fairness assessment which supported the proposed offer.
He said Old Mutual made MondayÆs statement ôbasically to force the Skandia board to moveö.
LondonÆs Financial Times reported yesterday that large shareholders Cevian Capital, Burdaras and SwedenÆs AP2 state pension fund were also positive on a merger of the two groups.
The analyst said the fact that the state pension fund was keen on the deal would give some comfort to Swedish retail investors.
ôThese shareholders hold a lot of clout with other large shareholders,ö he said. ôEveryone seems to support the offer.ö The analyst said Old Mutual was unlikely to budge on price or on the ratio of shares and money being offered.
ôMutual wouldnÆt have put the numbers out if they didnÆt think it was their final offer,ö he said.
Neill Young, insurance analyst at Coronation Fund Managers, said the proposed price was in line with where he expected the offer to be pitched.
Young said he was surprised at the split of cash and equity Old Mutual was proposing. The group said it would fund the deal with 40% cash and 60% equity.
ôI had anticipated that there would be a higher cash component to it,ö Young said. ôThat may be the issue they are flexible on.ö
Poole said MondayÆs announcement had been made at the behest of large shareholders to test the market reaction to the bid.
ôThe reaction seems to have been phenomenally favourable, with the share price moving up,ö Poole said.
He said that, assuming the ratio of Old Mutual shares the group had proposed in talks with SkandiaÆs board did not change, shareholders were looking at a slightly better deal.
Old Mutual has gained more than 2% since the potential price was made public on Monday evening, closing at R16,28 yesterday.
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