| Fri 2 Sep 2005, 15:42 | | Old Mutual Plc - SEK 43.60 Offer for Skandia |
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Old Mutual Plc - SEK 43.60 Offer for Skandia
OLD MUTUAL PLC
ISIN CODE: GB0007389926
JSE SHARE CODE: OML
NSX SHARE CODE: OLM
ISSUER CODE: OLOML
FOR IMMEDIATE RELEASE
This announcement and the information contained herein are restricted and are
not for release, publication or distribution, in whole or in part, in or into
the United States, Canada, Australia or Japan
Old Mutual plc
SEK 43.60 Offer for Skandia
Old Mutual and Skandia - a powerful combination
Date: 2 September 2005
PART 1 of 2
SUMMARY
1. Overview of the Offer
- Full Offer details made public to allow the Skandia board to make a
recommendation
- For every 100 Skandia Shares tendered, each Skandia Shareholder receives SEK
1,650 in cash and 137 New Old Mutual Shares (equivalent to SEK 16.5 in cash and
1.372 New Old Mutual Shares per Skandia Share)(1)
- Aggregate total consideration approximately SEK 44.9 billion (GBP3.3 billion),
equivalent to SEK 43.60 per Skandia Share
- Premium to market price on 12 May 2005(2) of 25 per cent.
- Conditional upon the Skandia Board making public a favourable recommendation
of the Offer no later than on 23 September 2005
- Combined market capitalisation of Enlarged Group GBP7.9 billion (SEK108.7
billion)(3)
- Pro forma Embedded Value per share of the Enlarged Group 137 pence
- Letters of intent to accept the Offer have been received in respect of in
aggregate 159,810,253 Skandia Shares, representing 15.6 per cent. of Skandia`s
issued share capital, from investors including Cevian Capital and Burdaras
- Mix and match facility with cash consideration guarantee for Skandia
Shareholders with 1,000 or less Skandia Shares
- Skandia Shareholders to represent 26 per cent. of the Enlarged Group
- Secondary listing on the Stockholm Stock Exchange
1. Assuming no election is made under the Mix and Match Facility, a
Skandia Shareholder under the Offer is entitled to receive (i) SEK42.0 per
share in respect of 39.3 per cent.of the number of Skandia Shares tendered and
(ii) 2.260 New Old Mutual Shares per share in respect of 60.7 per cent. of the
number of Skandia Shares tendered. Based on a closing price of Old Mutual
Shares of 144.5 pence on 1 September 2005 and SEK/GBP exchange rate of
SEK13.674:GBP1, the consideration as a whole equates to a value of SEK43.60
per Skandia Share.
2. Being the last day before 13 May, the day it was announced that Old
Mutual and Skandia were in discussions. The closing price of Skandia Shares
on 12 May 2005 was SEK34.9.
3. Based on a closing price of Old Mutual Shares of 144.5 pence on 1
September 2005 and SEK/GBP exchange rate of SEK13.674:GBP1.
2. Background to and reasons for the Offer
- Consistent with internationalisation strategy - compelling industrial logic
Increased growth potential of Enlarged Group
- Excellent fit, little overlap, compatible products and similar philosophies
- Attractive demographics support volume growth
- Flexible model with multi brand strategy
- Leader in open architecture platforms and products
- Substantial distribution capability to deliver growth
- Considerable organic growth inherent in the business
A powerful combination
- Clients` access to a wider range of skills and resources, benefits from
increased stability and security
- Diversity: strong in four major markets: SA, Sweden, USA, UK
- Significant critical mass: assets under management GBP192 billion (SEK 2,688
billion), Embedded Value GBP7.5 billion (SEK 105 billion)(4)
- Powerful platform: financially robust, proven management processes
- Balanced currency and market risks
Creates shareholder value(5)
- Expected to be Embedded Value earnings accretive in 2007
- Return on investment (Embedded Value basis) expected to exceed 12 per cent.
from 2007
- Annual cost and tax synergies of GBP70 million (SEK 960 million)
- Revenue synergies not included
- Dividend policy maintained
3. Enlarged Group
Detailed integration plan in place
- Considerable planning already undertaken, now awaiting Skandia management
input
- Introduce Old Mutual`s standard operating framework, disciplines and
incentives
- De-centralised management of business units with strong central financial
control
- Integration risk low as little overlap between businesses
- Retain Skandia brand as senior product brand in Europe
- Nordic and Continental Europe HQ in Stockholm and group HQ in London
- Sweden: stability will provide environment to rebuild franchise and restore
sales;
commitment to retain Skandia Liv as mutual
- UK: integrate Selestia and Skandia`s leading open architecture business;
maintain growth in growing market at higher margins
- Rest of Europe: manage growth on path to cash earnings
4. Combined Embedded Value less debt plus net present value of
synergies.
5. The statements made in this section should not be interpreted to
mean that the earnings per share of Old Mutual in the financial year following
the completion of the Offer, or in any subsequent period, will necessarily be
greater than those for the relevant preceding financial period. The expected
operational cost savings have been calculated on the bases of the existing
cost and operating structures of Old Mutual and Skandia and by reference to
current prices and exchange rates and the current regulatory environment.
The statements of estimated costs savings and tax benefits and one-off costs
of achieving them relate to future actions and circumstances which, by their
nature, involve risks, uncertainties and other factors. Because of this, the
cost savings and tax benefits referred to may not be achieved, or those
achieved could be materially different from those estimated.
Jim Sutcliffe, Chief Executive of Old Mutual, said:
`Combining these two great companies creates a stronger, better balanced group
with increased growth potential and a reduced risk profile. The industrial
logic of this combination is truly compelling.`
ENQUIRIES:
Old Mutual plc
Jim Sutcliffe, Chief Executive Tel: +44 (0)20 7002 7000
Julian Roberts, Finance Director Tel: +44 (0)20 7002 7000
Andrew Parkins, Investors Tel: +44 (0)20 7002 7000
Miranda Bellord (UK), Media Tel: +44 (0)20 7002 7000
Nad Pillay (SA), Media Tel: +27 (0)21 504 8026
Deutsche Bank Tel: +44 (0) 20 7545 8000
Lead adviser and corporate broker to Old Mutual
Tony Burgess
James Agnew
Marcus Heilner
Lenner & Partners Tel: +46 (0)8 5450 6100
Swedish financial adviser to Old Mutual
Lars Lenner
Merrill Lynch Tel: +44 (0)20 7996 1000
Co-adviser and corporate broker to Old Mutual
Michael Findlay
Patrick Bowes
Lazard Tel: +44 (0)20 7187 2000
Co-adviser to Old Mutual
William Samuel
Andrew Nason
College Hill Tel: +44 (0)20 7457 2020
Public relations adviser to Old Mutual
Alex Sandberg Tel: +44 (0)7831 851 844
Tony Friend Tel: +44 (0)7798 864 995
Kreab Tel: +46 (0)8 5064 5200
Public relations adviser to Old Mutual
Goran Riegnell
Christina Lindberg
There will be a presentation relating to the Transaction, to the Media and
analyst at 14:30 (UK time) and 15:30 (Swedish time) at Kreab AB, Floragatan 13,
SE 11475 Stockholm, Sweden.
The dial in details for both presentation are:
International dial in: +44 (0) 1452 542 300
UK dial in: 0800 953 1444
South Africa dial in: 0800 994090
A copy of the presentation will be available on www.oldmutual.com in due
course.
Deutsche Bank AG London is acting for Old Mutual plc and no one else in
connection with the Transaction and will not regard any other person (whether
or not a recipient of this announcement) as its client in relation to the
Transaction and will not be responsible for providing the protections afforded
to its clients nor for giving advice in relation to the Transaction or any
transaction or arrangement referred to, or information contained in this
announcement.
Merrill Lynch International is acting for Old Mutual plc and no one else in
connection with the Transaction and will not regard any other person (whether
or not a recipient of this announcement) as its client in relation to the
Transaction and will not be responsible for providing the protections afforded
to its clients nor for giving advice in relation to the Transaction or any
transaction or arrangement referred to, or information contained in this
announcement.
Lazard is acting for Old Mutual plc and no one else in connection with the
Transaction and will not regard any other person (whether or not a recipient
of this announcement) as its client in relation to the Transaction and will
not be responsible for providing the protections afforded to its clients nor
for giving advice in relation to the Transaction or any transaction or
arrangement referred to, or information contained in this announcement.
The Offer, all acceptances and withdrawals thereof or pursuant thereto and all
contracts made pursuant thereto and action taken or made or deemed to be taken
or made under any of the foregoing shall be governed by and construed in
accordance with Swedish law.
In accordance with the requirements of the UK Prospectus Rules it is confirmed
that this announcement does not constitute an offer to purchase (or otherwise
acquire) nor the solicitation of an offer to sell (or otherwise dispose of)
any securities of Old Mutual or Skandia. Any offer, invitation or inducement
to acquire or sell shares in Skandia will be made solely by means of the
prospectus (as updated by any supplementary prospectus) and associated
documents expected to be published during September 2005, and any decision to
keep, buy or sell shares in Skandia should be made solely on the basis of the
information contained in such documents. In addition, Old Mutual Shareholders
are urged to read the prospectus and associated class 1 shareholder circular
before making any decision regarding the Transaction. The prospectus, and
related documents, once published, may be obtained from Old Mutual`s website
at www.oldmutual.com or on request from Old Mutual.
The Offer is, subject to certain exceptions, not being made, directly or
indirectly, in or into the United States, Canada, Australia, Japan or any
other jurisdiction where to do so would constitute a violation of the laws of
such jurisdiction, or by use of the mails or by any means or instrumentality
(including without limitation, facsimile transmission, telephone and the
internet) of interstate or foreign commerce, or any facility of a national
securities exchange, of the United States, Canada, Australia or Japan.
Accordingly, copies of this announcement or any accompanying documents are not
being, directly or indirectly, mailed or otherwise distributed, forwarded or
transmitted in, into or from the United States. Any persons receiving such
documents (including, without limitation, custodians, nominees and trustees)
should observe these restrictions and should not, subject to certain
exceptions, mail or otherwise distribute, forward or transmit them in, into or
from the United States or any other jurisdiction where to do so would
constitute a violation of the laws of such jurisdiction, or use such means,
instrumentality or facility in connection with the Offer, and so doing may
render invalid any related purported acceptance of the Offer. Any persons
(including, without limitation, custodians, nominees and trustees) who would
or otherwise intend to, or may have a contractual or other legal obligation
to, forward this announcement or any accompanying documents to the United
States should seek appropriate advice before taking any action.
These materials are not for distribution, directly or indirectly, in or into
the United States. They are not an offer of securities for sale into the
United States. There will be no public offer of the Old Mutual Shares in the
United States.
The New Old Mutual Shares have not been, and will not be, registered under the
US Securities Act of 1933 (the `Securities Act`) or with any securities
regulatory authority of any state or other jurisdiction of the United States
or under the applicable securities laws of Canada, Australia and Japan.
Accordingly, subject to certain exceptions, the New Old Mutual Shares may not
be offered or sold within the United States or Canada, Australia and Japan or
any other jurisdiction where to do so would constitute a violation of the laws
of such jurisdiction, or to or for the account or benefit of any person in the
United States, Canada, Australia or Japan.
This announcement includes forward-looking statements about Old Mutual,
Skandia and the Enlarged Group. By their nature, forward-looking statements
involve risks and uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future. Old Mutual cautions you
that forward-looking statements are not guarantees of future performance and
the Old Mutual Group`s actual results of operations, financial condition and
liquidity, and the development of the industry in which the Old Mutual Group
operates may differ materially from those made in or suggested by the forward-
looking statements contained in this document. Events that may cause actual
results to differ from such forward-looking statements include, but are not
limited to: fluctuations in the capital markets; fluctuations in interest rate
and exchange rates; increased regulation or regulatory scrutiny; the
occurrence of unforeseen disasters or catastrophes; political or economic
instability in their principal markets; adverse outcomes in litigation; and
failure to achieve the benefits of the proposed Transaction. These forward-
looking statements speak only as at the date of this announcement. Except as
required by the UK Listing Authority, the London Stock Exchange or applicable
law, Old Mutual does not undertake any obligation to update or revise publicly
any forward-looking statement, whether as a result of new information, future
events or otherwise. Except as required by the UK Listing Authority, the
London Stock Exchange or applicable law, Old Mutual expressly disclaims any
obligation or undertaking to release publicly any updates or revisions to any
forward-looking statement contained herein to reflect any change in Old
Mutual`s expectations with regard thereto or any change in events, conditions
or circumstances on which any such statement is based. In addition, even if
the Old Mutual Group`s results of operations, financial condition and
liquidity, and the development of the industry in which the Old Mutual Group
operates are consistent with the forward-looking statements contained in this
announcement, those results or developments may not be indicative of results
or developments in subsequent periods.
This announcement and the information contained herein are restricted and are
not for release, publication or distribution, in whole or in part, in or into
the United States, Canada, Australia or Japan
Old Mutual plc
SEK 43.60 Offer for Skandia
Old Mutual and Skandia - a powerful combination
Date 2 September 2005
PART 2 of 2
OFFER FOR SKANDIA
1. Introduction
Old Mutual plc (`Old Mutual`) announces a cash and share offer (the `Offer`)
for the entire issued share capital of Forsakringsaktiebolaget Skandia (publ)
(`Skandia`), which values Skandia at approximately SEK 44.9 billion (GBP3.3
billion), equivalent to SEK 43.60 per Skandia Share. For every 100 Skandia
Shares tendered, each Skandia Shareholder will receive SEK 1,650 in cash and
137 New Old Mutual Shares, equivalent to 1.372 New Old Mutual Shares and SEK
16.5 in cash per Skandia Share(6).
Letters of intent to accept the Offer have been received in respect of in
aggregate 159,810,253 Skandia Shares, representing 15.6 per cent. of Skandia`s
issued share capital, from investors including Cevian Capital and Burdaras.
The Offer is, inter alia, conditional upon the Board of Skandia making public
a favourable recommendation of the Offer no later than on 23 September 2005.
2. The Offer
The Offer consists of a mixture of cash and New Old Mutual Shares as
consideration which values each Skandia Share at SEK 43.60. Old Mutual is
offering each Skandia shareholder:
- In respect of 39.3 per cent. of the number of Skandia Shares tendered by
such shareholder: SEK 42.0 per Skandia Share in cash (the `Cash
Consideration`); and
6. Assuming no election is made under the Mix and Match Facility, a
Skandia Shareholder under the Offer is entitled to receive (i) SEK42.0 per
share in respect of 39.3 per cent. of the number of Skandia Shares tendered and
(ii) 2.260 New Old Mutual Shares per share in respect of 60.7 per cent. of the
number of Skandia Shares tendered. Based on a closing price of Old Mutual
Shares of 144.5 pence on 1 September 2005 and SEK/GBP exchange rate of
SEK13.674:GBP1, the consideration as a whole equates to a value of SEK43.60
per Skandia Share.
- In respect of the remaining 60.7 per cent. of the number of Skandia Shares
tendered by such shareholder: 2.260 New Old Mutual Shares, equivalent to a
value of SEK 44.65 per Skandia Share (the `Share Consideration`).
Skandia Shareholders will also be offered a mix and match facility (the `Mix
and Match Facility`) allowing them to elect to tender a higher proportion of
their Skandia Shares in return for the Cash Consideration or to tender a
higher proportion of their Skandia Shares in exchange for the Share
Consideration, subject to matching elections from other Skandia Shareholders.
Skandia Shareholders who held in aggregate 1,000 or less Skandia Shares on 1
September 2005 will be guaranteed satisfaction of elections for Cash
Consideration under the Mix and Match Facility. The Mix and Match Facility is
further described in section 11 below.
No commission will be charged in respect of settlement of the Offer.
Old Mutual does not own any shares or other financial instruments in Skandia.
3. Value of the Offer
All calculations of the Offer value (including the Share Consideration) and
premium in this press announcement are based on a closing price for Old Mutual
shares of 144.5 pence on the London Stock Exchange on 1 September 2005, and an
exchange rate of SEK 13.674:GBP1 and assume that no election is made under the
Mix and Match Facility.
- The Offer values each Skandia Share at approximately SEK 43.60;
- The Offer values the whole of the issued share capital of Skandia at
approximately SEK 44.9 billion;
- The Offer represents:
- A premium of approximately 52.0 per cent. to the closing price of SEK 28.7
per Skandia Share on the Stockholm Stock Exchange on 1 December 2004, the day
prior to press comments that Skandia was considering its options;
- A premium of approximately 25.0 per cent. to the closing price of SEK 34.9
per Skandia Share on the Stockholm Stock Exchange on 12 May 2005, the day
prior to the announcement by Old Mutual that the two companies were in
early stage discussions;
- A premium of approximately 4.6 per cent. to the closing price of SEK 41.7
per Skandia Share on the Stockholm Stock Exchange on 1 September 2005, the
last trading day prior to the publication of this announcement;
- A premium of approximately 5.3 per cent. to the volume weighted average
price of SEK 41.4 per Skandia Share on the Stockholm Stock Exchange over the
ten trading days up to and including 1 September 2005, the last trading day
prior to the publication of this announcement;
The Offer represents a multiple of 1.40 times Skandia`s unaudited Embedded
Value per share as at 30 June 2005.
Assuming full acceptance of the Offer, a maximum amount of approximately SEK
17.0 billion (GBP1.24 billion) in cash is payable and a maximum number of
1,413 million New Old Mutual Shares will be issued under the Offer, indicating
a total value of the Offer amounting to approximately SEK 44.9 billion.
4. Background to and reasons for the Offer
A key element of Old Mutual`s strategy has been to continue to
internationalise the Old Mutual Group. Six years ago, virtually all of Old
Mutual`s revenues originated in South Africa. Now, based on adjusted
operating profit for the six months ended 30 June 2005, 75 per cent. of Old
Mutual`s business is generated in Africa, 20 per cent. in the USA and 5 per
cent. in the UK and the Rest of the World. Old Mutual has a balance of
businesses which are cash generative, with total cash flow of GBP2,012 million
for the six months ended 30 June 2005, and others which provide opportunities
both now and in the future. The proposed Transaction represents a major step
forward in Old Mutual`s strategy to expand its asset gathering and asset
management activities, further diversifying its earning base and building on
its powerful South African base.
Discussions were initiated between Old Mutual and Skandia in December 2004 to
investigate the potential attractions for both organisations arising from a
combination of the two groups. Since then, Old Mutual has developed a deep
understanding of Skandia`s business, which has strengthened its belief in the
benefits arising from the combination.
Industrial logic
The Transaction is based on sound industrial logic, which is expected to
produce high growth, lower risk and clear benefits for shareholders, clients,
IFAs and employees alike.
Old Mutual and Skandia make an excellent fit: both are international insurance
businesses with little geographic overlap, compatible product ranges, an
absence of legacy product issues and similar business philosophies - open
architecture and multiple distribution channels. Together they will create an
international financial services group with high quality asset gathering and
asset management capability to build and protect client assets.
Old Mutual will seek to combine its strengths with Skandia`s to build regional
customer-facing platforms that are expected to have a competitive edge over
traditional providers of savings and investment products by offering customers
a wide range of investment choices, managed and reported on highly efficient
servicing platforms.
In Europe, the Enlarged Group will retain the Skandia name as its senior
product brand, with the backing of Old Mutual`s financial strength. By
combining the product and distribution channels of Old Mutual and Skandia, the
Enlarged Group will seek to grow market shares strongly.
The confidence and prosperity of clients is the key to success. It is
envisaged that the Enlarged Group will benefit from increased stability and
security.
Clients will also have access to a wider range of skills and resources. The
commitment to provide value for money products and services will continue to
be a guiding principle for the Enlarged Group. In addition, it is intended
that Skandia Liv will remain as a mutual.
For IFAs, the Enlarged Group will be committed to retain and improve service
standards and product quality.
The combination of Old Mutual and Skandia will provide opportunities for the
new employees of the Enlarged Group and the support of employees will be key
to the delivery of future growth plans. The Transaction presents an attractive
long-term solution for these employees, providing stability of ownership and
improving their prospects as part of a business with a strengthened market
position and growth opportunities.
Favourable demographics
The Enlarged Group will be well placed to exploit the favourable demographics
in its key markets in Europe and the US, in addition to the opportunities to
serve the growing middle classes in South Africa and the emerging markets.
Substantial growth opportunities also exist for the Enlarged Group through
participation in fundamental changes to the European savings market, as Europe
moves closer towards the US pensions model, with reductions in state funding,
greater transparency and the trend towards open architecture.
Open architecture
In many of the Enlarged Group`s major markets, the open architecture segment
is growing strongly as clients and IFAs are attracted by the increased
transparency and greater investment management flexibility offered by these
products. This flexibility requires to be underpinned by high quality risk
management and reporting tools. Skandia has stable systems and an excellent
service record while Selestia has modern systems built by Old Mutual in South
Africa at low cost.
Powerful distribution
In South Africa and Sweden, the Enlarged Group will have broad distribution
with its own sales forces and bancassurance, as well as IFAs. In Europe and
the US the focus will be on independent distributors.
Leading positions in consolidating industry
The Enlarged Group will be the eighth largest European life assurer by
Embedded Value. The Enlarged Group will have approximately 47,000 employees
worldwide and total assets under management of GBP192 billion (SEK 2,688
billion) (as at 30 June 2005). The Enlarged Group will command increased
investor focus, potentially a lower cost of capital and increased strategic
options.
Balanced risk
The Enlarged Group will have a more balanced exposure to individual currencies
and markets. Old Mutual`s strong cash flow from its South African operations
and its US asset management business will be able to support growth
opportunities in the Enlarged Group`s other business operations.
Managing the Enlarged Group
Old Mutual`s principle is to operate on a decentralised basis with strong
central financial controls and risk management. Within this framework all
business activities are managed within the operating businesses. Old Mutual`s
management framework will be applied to achieve management`s growth plans.
Old Mutual is well advanced in its plans for integration and already has
significant integration experience. Old Mutual will retain its corporate
headquarters in London, while the Enlarged Group`s operational headquarters
for the Nordic and Continental Europe businesses will be based in Stockholm.
In Sweden, the Skandia brand will be retained and sales will be restored in a
stabilised, reinvigorated business. Old Mutual and Skandia management will
further undertake a strategic review on how best to realise the full potential
of SkandiaBanken for the shareholders. In the UK, the Enlarged Group will take
advantage of Skandia`s open architecture life and savings solutions with the
aim to continue to grow the business. In addition, the Enlarged Group will
seek to improve profitability at Bankhall and to improve margins elsewhere.
It is also intended to integrate Selestia and Skandia. In the rest of Europe,
the Enlarged Group will seek to maintain substantial growth while pursuing a
path to improved cash earnings.
The Offer, if completed, will remove uncertainty surrounding the future
strategic direction and governance of Skandia by giving it a long-term
committed owner. Old Mutual management`s experience in the US market for life
assurance and asset management and in other businesses will be highly relevant
as it seeks to re-establish stability at Skandia, rebuild its reputation and
increase confidence in its business.
5. Financial effects of the Transaction(7)
The Old Mutual Board believes that the Transaction will create significant
value for shareholders with a post-tax return on investment (Embedded Value
basis) well above the Enlarged Group`s cost of capital.
The Transaction is expected to be accretive to Embedded Value earnings per
share in the year ending 31 December 2007. On an International Financial
Reporting Standards basis, the Transaction is expected to be significantly
dilutive to adjusted operating earnings per share. The combined Embedded Value
of the Enlarged Group including the net present value of synergies and
adjusting for the market value of Old Mutual`s listed subsidiaries at 10
August 2005 is approximately GBP7.5bn (equal to 137 pence per share).
The Transaction is expected to be slightly dilutive to Old Mutual`s Embedded
Value per share, but the Enlarged Group`s greater diversification is expected
to lead to a reduced cost of capital and this in turn, is expected to result
in a substantial uplift in the excess of RoEV (return on Embedded Value) over
the cost of capital.
The Enlarged Group will be well capitalised for future growth with a strong
solvency position.
Synergies(8)
Old Mutual has identified a number of synergies that arise directly from the
combination of Old Mutual and Skandia.
Targeted cost savings and tax benefits that can be achieved have been fully
calculated and amount to approximately GBP70 million (SEK960 million) pre-tax
per year. The net present value of these savings, making allowance for the
costs involved in delivering them, is approximately GBP480 million (SEK6.6
billion). These figures have been calculated on a conservative approach, with
revenue synergies from the inclusion of Old Mutual`s asset management products
on the Skandia platform not included, although these are also expected to be
considerable.
The net present value of the cost savings and tax benefits represent
approximately 15 per cent. of the Offer value. Old Mutual estimates that the
majority of these savings can be achieved in 2007, with the full amount
expected to be achieved in 2008.
The expected cost synergies of GBP70 million (SEK960 million) pre-tax per year
arise in four main areas, which in summary are, (i) elimination of Group head
office duplication of GBP28 million (SEK386 million), (ii) consolidation of UK
head office functions of GBP2 million (SEK33 million), (iii) UK operational
synergies of GBP30 million (SEK405 million) and (iv) tax synergies through the
accelerated realisation of tax losses on Old Mutual`s unrelieved taxable UK
expenses of GBP10 million (SEK 136 million). Expected costs of achieving
synergies will be GBP71 million, spread over 2006 (GBP34 million) and 2007
(GBP37 million).
7. The statements made in this section should not be interpreted to mean
that the earnings per share of Old Mutual in the financial year following the
completion of the Offer, or in any subsequent period, will necessarily be
greater than those for the relevant preceding financial period.
8. The expected operational cost savings have been calculated on the
bases of the existing cost and operating structures of Old Mutual and Skandia
and by reference to current prices and exchange rates and the current regulatory
environment. The statements of estimated costs savings and tax benefits and
one-off costs of achieving them relate to future actions and circumstances
which, by their nature, involve risks, uncertainties and other factors. Because
of this, the cost savings and tax benefits referred to may not be achieved, or
those achieved could be materially different from those estimated.
6. Information on Old Mutual
Old Mutual is an international financial services group, incorporated and
headquartered in the UK, with its primary listing on the London Stock
Exchange. Its businesses encompass life assurance, asset management, banking
and general insurance. It also has listings on the JSE and on the Malawi,
Namibian and Zimbabwe Stock Exchanges. Founded in 1845 in Cape Town, Old
Mutual is the largest financial services company in Africa. Its majority owned
listed subsidiary, Nedbank, is the fourth largest bank in South Africa and its
77 per cent. owned listed subsidiary, Mutual & Federal, is one of the largest
general insurers in South Africa.
At the time of Old Mutual`s demutualisation and listing in 1999, Old Mutual
declared its interest in internationalising its business. In 2000, Old Mutual
acquired UAM and in 2001, Fidelity & Guaranty Life, which provided the
foundations of Old Mutual`s US businesses. Old Mutual also has two smaller
businesses in the UK, Selestia and OMAM UK and fledgling operations in India
and China. Today, approximately 50 per cent. of the Old Mutual Group`s life
new business and 75 per cent. of the Old Mutual group`s assets under
management emanate from the USA or the UK.
Old Mutual`s adjusted operating profit for the six months to 30 June 2005 rose
by 29 per cent. to GBP554 million. As at 30 June 2005, the Old Mutual Group`s
Embedded Value was GBP5.3 billion and it had assets under management of GBP158
billion. Old Mutual had approximately 41,000 employees in 2004.
7. Information on Skandia
Skandia, founded in 1855 in Sweden, is a financial services group with a
primary listing on the A-list of the Stockholm Stock Exchange and has a
secondary listing on the London Stock Exchange. Skandia`s largest markets, by
revenue and operating profit, are the UK and Sweden. Skandia is also active in
selected markets in Europe, Latin America and Asia Pacific. Skandia is a
supplier of long-term savings and pensions products, with a particular focus
on unit linked products and mutual funds.
As at 30 June 2005, the Skandia Group had assets under management of SEK482
billion (GBP34.4 billion). For the six months ended 30 June 2005, revenues
rose by 15 per cent. to SEK7.8 billion (GBP584 million). The Skandia Group
had approximately 5,800 employees in 2004.
Skandia`s UK operation is the Skandia Group`s largest business. Skandia UK`s
product offerings include unit linked assurance, mutual funds and protection.
Skandia UK implemented the multi-manager concept twenty years ago. Skandia
owns 81 per cent. of Bankhall, a UK provider of services to independent
financial advisers. Skandia also operates an offshore company, Royal Skandia,
based on the Isle of Man, which offers products to international investors and
expatriates.
Skandia is one of the largest life assurers in Sweden, and has operations in a
number of other Nordic countries. Approximately 20 per cent. of Skandia`s
business is in Sweden, where it has dealings with one in every four
households. Skandia Sweden provides a full product range in the areas of
protection, investments, healthcare, pensions and banking. These are provided
under the Skandia brand name. The Skandia brand also includes products from
its subsidiary Skandia Liv, which is run on a mutual basis.
In addition to Skandia`s core markets of Sweden and the UK, Skandia operates
in a select number of European countries offering unit linked insurance
products and mutual funds. These include Germany, Austria, Spain, Italy,
Poland, Switzerland, France and Liechtenstein.
Skandia has established operations in a number of countries in Latin America
and Asia Pacific. In Latin America, Skandia operates out of Mexico, Colombia,
and Chile. Skandia has operated in Colombia for over fifty years. In Asia
Pacific, Skandia has established itself in Australia and China.
8. Current trading and prospects
As stated in Old Mutual`s recently published interim results for the first six
months of 2005, Old Mutual has made substantial steps in using its powerful
South African base to build an international franchise, with over half of its
life sales and more than 70 per cent. of its assets under management now in
the USA and the UK. The flexible, multi-brand strategy plays well in the
market place, both in the USA and elsewhere, as the open architecture multi-
manager concept has become an increasingly powerful trend in life assurance
and asset management industries. Conditions remain broadly favourable,
particularly in South Africa, and while markets can always affect the outcome,
the Old Mutual Group`s operational robustness is now well established.
Each of Old Mutual`s businesses is now well placed to seize opportunities for
growth in their market places. Old Mutual is set to maintain the strong
performance of the first half during the rest of 2005.
As stated in Skandia`s recently published results for the first six months of
2005, Skandia`s revenues rose 15 per cent. to SEK 7.8 billion and assets under
management grew by 17 per cent. to SEK482 billion.
9. Dividend policy
Old Mutual intends to maintain its current dividend policy, which is to seek
to achieve steadily increasing returns over time, reflecting the underlying
rate of progress and the cash flow requirements of the business.
Shareholders of the Enlarged Group whose holdings are registered in the VPC
system will receive dividend payments in SEK.
10. Employees
The Board of Old Mutual believes that the prospects for employees of both
Groups will generally be enhanced through the strengthened market position and
growth prospects of the Enlarged Group. The employment rights of both Old
Mutual and Skandia employees will be fully protected.
11. Further details of the Offer
The Mix and Match Facility
Shareholders of Skandia who accept the Offer may elect to vary the proportions
of Skandia Shares they tender in return for the Cash Consideration and the
Skandia Shares they tender in return for the Share Consideration. The total
number of New Old Mutual Shares to be issued in consequence of the Offer and
the total amount of cash to be paid under the Offer will not be varied as a
result of elections made under the Mix and Match Facility (other than as set
out below in relation to Skandia Shareholders who hold in aggregate 1,000 or
less Skandia Shares). Valid elections for the Share Consideration made by
Skandia Shareholders in excess of their basic entitlements to New Old Mutual
Shares will be satisfied in full where sufficient New Old Mutual Shares are
available as a result of other accepting shareholders of Skandia validly
making elections for the Cash Consideration in excess of their basic
entitlements thereto, thereby releasing New Old Mutual Shares to which they
would otherwise be entitled under the Offer, and vice versa with respect to
elections for additional Cash Consideration. To the extent elections cannot be
satisfied in full, they will be scaled down on a pro rata basis and the
balance of the consideration will be satisfied in accordance with the basic
terms of the Offer. Further details of the Mix and Match Facility will be
included in the prospectus to be published in connection with the Offer.
Skandia Shareholders who hold in aggregate 1,000 or less Skandia Shares at 1
September 2005 will receive priority in electing for additional Cash
Consideration under the Mix and Match Facility(9) . Therefore, elections by
other Skandia Shareholders for Cash Consideration will only be satisfied after
all such valid elections by Skandia Shareholders holding 1,000 or less Skandia
Shares have been satisfied in full. Further, to the extent elections for Cash
Consideration by Skandia Shareholders holding in aggregate 1,000 or less
Skandia Shares cannot be satisfied as a result of matching elections, Old
Mutual will contribute the cash funds necessary to fully satisfy all elections
for Cash Consideration made by such Skandia Shareholders.
Skandia Shareholders electing to tender a higher proportion of their Skandia
Shares in return for the Cash Consideration should be aware that, based on the
closing price of Old Mutual Shares as at 1 September 2005 of 144.5 pence and
an SEK/GBP exchange rate of SEK 13.674:GBP1, the Share Consideration values
each Skandia Share at SEK44.65 whereas the Cash Consideration values each
Skandia Share at SEK 42.0.
Fractional entitlements
Fractions of New Old Mutual Shares will not be issued to accepting Skandia
Shareholders. Fractional entitlements will be aggregated and sold in the
market with the net proceeds distributed pro rata to the Skandia Shareholders
entitled thereto.
Conditions
Completion of the Offer is conditional upon:
(i) The shareholders of Old Mutual (a) approving the Offer and authorising the
Board of Directors of Old Mutual to waive, amend, vary, increase or extend the
terms and conditions of the Offer and to do all such things as it considers
necessary or expedient in connection with the Offer, (b) increasing the
authorised share capital of Old Mutual to enable the issuance of the New Old
Mutual Shares, and (c) authorising the Board of Directors of Old Mutual to
allot the New Old Mutual Shares;
(ii) The Offer being accepted to such an extent that Old Mutual becomes the
owner of more than 90 per cent. of the total number of the shares and votes in
Skandia on a fully diluted basis;
(iii) No other party announcing an offer to acquire shares in Skandia on terms
which are more favourable than the Offer for the shareholders of Skandia;
9. Only holders of Skandia Shares which are directly registered or
registered in the name of an authorised nominee in accordance with the Swedish
Act (1998:1479)on Record-Keeping of Financial Instruments will be offered this
priority and guarantee. Shareholders who hold shares through other nominees or
custodians are referred to the right of their respective nominee or custodian
the Mix and Match Facility. Hence, for example a Skandia Shareholder who holds
shares through a deposit bank or other agent, which appears to be a nominee
registered shareholder in the VPC system, will not be given any priority or
guarantee under the Mix and Match Facility.
(iv) The Board of Skandia making public a favourable recommendation of the
Offer no later than on 23 September 2005 and not subsequently withdrawing that
recommendation;
(v) Skandia signing the proposed Co-operation Agreement, the essential terms
of which can be found under `Proposed Co-operation Agreement` below, no later
than on 23 September 2005;
(vi) Necessary agreements to listing being obtained from the London and
Stockholm Stock Exchanges so that the New Old Mutual Shares following
implementation of the Offer are admitted to listing on such exchanges (on the
A-list in relation to the Stockholm Stock Exchange);
(vii) Skandia not taking any measures, which would have an adverse effect on
the prerequisites for making the Offer or its implementation, including,
without limitation, disposing of any material part of its business or assets
or otherwise essentially changing the ordinary course of its business in
conflict with past practice;
(viii) All necessary approvals and clearances from authorities, including
competition and financial supervisory authorities, in Sweden, the UK, the USA,
South Africa and elsewhere in connection with the Offer, its implementation or
the acquisition of Skandia by Old Mutual or any of its subsidiaries having
been obtained on terms acceptable to Old Mutual or applicable deadlines or
waiting periods in relation thereto having expired or been terminated and
there being no notice of any intention to revoke, suspend, restrict, impose
any conditions in relation to, vary, amend or not to renew any authorisations,
certificates, licences, permissions or approvals of Skandia Group companies;
(ix) Neither the Offer nor the acquisition of the shares in Skandia being
rendered partially or wholly impossible or significantly impeded as a result
of legislation, regulation, any decision of court or public authority, or
other comparable measures, including third party actions, beyond Old Mutual`s
control in Sweden, the UK, the USA, South Africa or elsewhere;
(x) No material adverse change in Skandia`s financial position or operations
occurring after the announcement of the Offer; such material adverse change
meaning an event that materially adversely affects Skandia`s liquidity or
results and which could not have been reasonably known or anticipated by Old
Mutual at the time of announcement of the Offer;
(xi) No information made public by Skandia or disclosed by Skandia to Old
Mutual being materially inaccurate or misleading, and Skandia not having
failed to make public any matter which should have been made public by it
prior to date of announcement of the Offer;
(xii) Old Mutual receiving the funds under the debt financing of the Offer as
set out below under `Financing of the Offer`.
Old Mutual reserves the right to withdraw the Offer in the event that it is
clear that any of the above conditions is not fulfilled or cannot be
fulfilled. However, the Offer may only be withdrawn with reference to the non-
fulfilment of the conditions in sections (iv)-(xii) above if the non-
fulfilment is of material importance for Old Mutual`s acquisition of the
shares in Skandia.
Old Mutual reserves its right to waive, in whole or in part, any or all of the
conditions above, and, with respect to condition (ii) above, to complete the
Offer at a lower level of acceptance.
Proposed Co-operation Agreement
Old Mutual has proposed to Skandia a Co-operation Agreement in connection with
the Offer, pursuant to which Skandia inter alia would agree:
- that it will not solicit, encourage or facilitate any alternative
acquisition proposal for Skandia and not engage in any discussions with any
third party with respect to an alternative acquisition proposal, unless it
receives a bona fide unsolicited acquisition proposal and a majority of the
Skandia Board (with the consultation of its legal and financial advisors) in
good faith determines that such proposal represents a superior proposal and
that such discussions with the third party are required in order to comply
with its fiduciary obligations to Skandia`s Shareholders;
- that it will neither directly nor indirectly undertake any other action that
may prevent or frustrate the Offer; and
- that it will co-operate in general with and assist Old Mutual in the
preparation of the prospectus regarding the Offer and necessary filings for
regulatory approvals to be made to competition authorities and financial
supervisory authorities.
Financing of the Offer
Old Mutual has funds available to finance the total Cash Consideration under
the Offer, totalling GBP1,243 million, as follows:
- Own cash resources in hand, and
- An existing GBP1,100 million revolving credit facility (the `Revolving
Facility`) which is expected to be replaced by a new GBP1,250 million
revolving credit facility (the `Replacement Facility`); and
- An agreement with Deutsche Bank (the `ECP Agreement`) for Deutsche Bank to
subscribe for up to GBP150 million of notes under Old Mutual`s GBP600 million
Euro-Commercial Paper Programme (the `Programme`) which has been entered into
to secure financing in excess of the Revolving Facility until the Replacement
Facility is entered into.
The Offer is conditional on Old Mutual receiving the funds under the Revolving
Facility and the ECP Agreement (or the Replacement Facility if it has replaced
the Revolving Facility).The Revolving Facility is an ordinary facility with
terms and conditions customary for corporate credits in the international loan
market. The Revolving Facility is fully available to Old Mutual. Drawdown from
the Revolving Facility can be made if a number of standard conditions for
financing, a summary of which can be found in Appendix 1, have been met. The
Replacement Facility would in all material respects be on the same terms and
conditions as the Revolving Facility.
Under the ECP Agreement, Deutsche Bank has agreed to subscribe for up to
GBP150 million of notes at any time that Old Mutual requests prior to 31 March
2006. No notes are outstanding under the Programme so the entire GBP600
million under the Programme is available. Notes will be issued under the ECP
Agreement if a number of standard conditions, a summary of which can be found
in Appendix 1, have been met.
In addition to the funds available as described above, Old Mutual intends to
raise approximately Euro 1.2 billion of subordinated debt counting as upper
tier 2 and lower tier 2 capital under the United Kingdom Financial Services
Authority`s rules prior to payment of the Cash Consideration.
Letters of intent to accept the Offer
Letters of intent to accept the Offer have been received in respect of in
aggregate 159,810,253 Skandia Shares, representing 15.6 per cent. of Skandia`s
issued share capital, from investors including Cevian Capital and Burdaras.
Regulations
The Offer shall be governed by and construed in accordance with the laws of
Sweden. The Swedish Industry and Commerce Stock Exchange Committee`s Rules on
Public Offers for the Acquisition of Shares (2003) and the Securities
Council`s public statements on interpretation and application thereof are
applicable to the Offer.
12. Listing and dealings
Old Mutual has a primary listing on the London Stock Exchange and has
secondary listings on the JSE and on the Malawi, Namibian and Zimbabwe Stock
Exchanges. Application will be made to the UK Financial Services Authority
(the `FSA`) and the London Stock Exchange for the New Old Mutual Shares to be
admitted to the Official List and to trading on the London Stock Exchange.
Application will also be made for the New Old Mutual Shares to be listed (on a
secondary basis) on the A-list of the Stockholm Stock Exchange.
It is expected that listing will become effective and dealings, for normal
settlement, on the London Stock Exchange will begin shortly following the date
on which Old Mutual announces that all conditions to the Offer have been
fulfilled and that listing will become effective and dealings on the Stockholm
Stock Exchange will begin on or around the same date.
The New Old Mutual Shares will, when issued and fully paid, rank pari passu in
all respects with the existing Old Mutual Shares, including the right to
receive all dividends and other distributions (if any) declared, made or paid
by Old Mutual after the date of issue of the Consideration Shares, other than
in respect of Old Mutual`s 2005 interim dividend of 1.85 pence due to paid by
Old Mutual on 30 November 2005.
Further details on listings and dealings will be included in the prospectus
regarding the Offer.
13. Extraordinary General Meeting of Old Mutual
The Offer is conditional upon, among other things, Old Mutual Shareholders
approving the Transaction and the issue of the New Old Mutual Shares pursuant
to the Offer. A shareholder circular, including a notice convening an
Extraordinary General Meeting of Old Mutual is expected to be sent to Old
Mutual Shareholders for this purpose in due course.
14. Overseas Shareholders
The availability of the Offer to persons not resident in Sweden or the UK may
be affected by the laws of the relevant jurisdiction where they are resident.
Skandia Shareholders who are not resident in Sweden or the UK should inform
themselves about, and observe, any applicable requirements.
15. Indicative timetable
The prospectus regarding the Offer will consist of a prospectus relating to
the New Old Mutual Shares to be approved by the FSA and a document containing
specific information for the Swedish market. In addition, a retail shareholder
information brochure will be published. These documents are expected to be
published by the end of September 2005. The Offer is expected to be completed
by the end of 2005 or early 2006. Further details regarding the publication of
these documents and the timetable for the Offer period will follow in a
separate press release in due course.
16. Compulsory Acquisition and De-listing
Assuming that Old Mutual through the Offer obtains more than 90 per cent. of
Skandia`s issued share capital and voting rights on a fully diluted basis, Old
Mutual intends to commence a compulsory acquisition procedure under the
Swedish Companies Act to acquire all remaining Skandia Shares. In connection
therewith, Old Mutual intends to promote a de-listing of Skandia`s Shares from
the Stockholm Stock Exchange and the London Stock Exchange.
17. Employee option holders
Skandia employees who hold empl
