| Mon 5 Sep 2005, 11:40 | | Old Mutual's Skandia bid hits a snag |
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Old Mutual`s Skandia bid hits a snag
September 5, 2005
By Sherilee Bridge
Johannesburg - Old Mutual`s R38 billion formal offer to take over Skandia was almost scuppered by the Swedish insurers` board, which was concerned about Old Mutual`s ties to a Zimbabwean media company that is 51 percent owned by Robert Mugabe`s government.
An Old Mutual spokesperson said the company held a 19 percent stake in Zimbabwe Newspapers. Swedish radio reports said a majority of the board had cited the Mugabe link as the key negative factor, and said members would prefer Skandia to continue as a stand-alone business.
But Old Mutual`s bid for Skandia is in. South Africa`s biggest life assurer tabled its improved 43.60 kronor (R40) a share bid for Skandia on Friday after weeks of speculation.
An upbeat Jim Sutcliffe, the chief executive of Old Mutual, said it was now up to the Skandia board to make a recommendation to its shareholders.
The combined cash and scrip offer is 52 percent higher than Skandia`s share price of 28.70 kronor on December 1, the day before news that Skandia was considering its options, and 25 percent more than its closing of 34.90 kronor on May 12, the day before Old Mutual admitted interest in the Swedish insurer.
The premium was, however, only 4.6 percent higher than Skandia`s closing share price of 41.70 kronor the day before the offer and 5.3 percent higher than the volume-weighted average price of 41.1 kronor over the 10 days running up to the offer.
Old Mutual was originally willing to pay 42 kronor a share for Skandia, made up of 60 percent shares and 40 percent cash.
If successful, the merger would create Europe`s eighth-largest life assurer by embedded value, with total assets under management of ú192 billion (R2.21 trillion) and 47 000 employees.
It `would result in a stronger, better balanced group with increased growth potential and a reduced risk profile`, said Sutcliffe.
But above all, the merger would allow Old Mutual to realise its dream of becoming an international financial services company.
Old Mutual, which made all of its profit out of South Africa just six years ago, has been wanting to balance its earnings across geographies.
Skandia`s largest markets are in the UK and Sweden but it is active in Europe, Latin America, Australia and China, which would complement Old Mutual`s fledgling operations in India and China.
There is little overlap between the companies and Sutcliffe said only the UK businesses would have to be consolidated.
To pay for the purchase, Old Mutual will use the ú1.2 billion it has in funds available, raise about e1.2 billion (R9.4 billion) in subordinated debt and issue 1.413 billion new shares.
Old Mutual, which has a primary listing in London and a secondary listing in Johannesburg, plans to apply for a secondary listing in Stockholm.
Old Mutual must still convince the Skandia board, however. Only three directors were in favour of a bid, while eight were against it at the Skandia board meeting last weekend.
Old Mutual`s shares fell 1.62 percent to R16.41 on Friday, while the life assurance sector dipped 0.1 percent.
