| Mon 10 Oct 2005, 9:52 | | Advisers cost Old Mutual R860m |
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By Sherilee Bridge
Johannesburg - Old Mutual, Africa's largest insurer, would spend as much as R860 million on adviser fees related to its R38 billion takeover bid for Skandia, the company said in a document detailing terms of the offer.
"The aggregate costs and expenses payable by the Old Mutual group in connection with the transaction are estimated to amount to approximately ú75 million," the insurer said. Its advisers include Deutsche Bank and Merrill Lynch.
Old Mutual said on Friday that it had submitted copies of the prospectus and shareholder circular to the UK Listing Authority. The prospectus is expected to be released in mid-October.
The posting of the documents came amid a flurry of speculation over the future of the bid following the resignation of Skandia chairman Bernt Magnusson. An Old Mutual ally, Magnusson was one of the three members of Skandia's board to vote in favour of the offer.
Board members in favour of the deal were outvoted eight to three, and Skandia's board therefore advised shareholders against accepting the offer because it was "not attractive from a financial perspective".
The Swedish financial services firm immediately named Lennart Jeansson, a staunch objector to Old Mutual's planned takeover, as the replacement for Magnusson.
"I have total respect for Bernt Magnusson's decision," Jeansson said in a statement issued by Skandia."The board will now continue its work of developing Skandia.
Ultimately, it is Skandia's shareholders who determine the composition of the board, the direction of the company and its abode," he said.
Jeansson joined Skandia's board last year.
Most of the board believe that Skandia could succeed on its own, despite its difficult past.
Magnusson said it was not appropriate to continue leading the board when there were "different opinions on an important and central issue".
His resignation follows a call by Swedish shareholders' association Aktiespararna for the three Skandia board members who were in favour of the bid to step down. The deal's other backers, vice-chairman Bj÷rn Bj÷rnsson and Christer Gardell, have not indicated whether they would follow Magnusson.
Another resignation may come from Nick Poyntz-Wright, the head of Skandia's UK business and another supporter of the Old Mutual deal.
Poyntz-Wright has reportedly questioned the financial targets and strategic plan set out by the majority of Skandia's board as it maps its future as a stand-alone company.
Skandia's UK business, which generates about 60 percent of group profits, is a key attraction for Old Mutual, which aspires to generate equal earnings from its operations in South Africa, the US and UK.
At the moment 75 percent of its profit is generated in South Africa.
Old Mutual said it would ask its shareholders to vote on the offer on November 14, with the offer expected to close on November 21.
In the meantime, Swedish daily Svenska Dagbladet has identified Skandia's mystery new investor as US hedge fund Paulson & Co.
This new investor snapped up almost 5 percent of Skandia last week, making it the second-largest shareholder after Fidelity, with 9 percent.
Fidelity has already said it supported the offer and Svenska Dagbladet said the new investor was expected to do the same.
Nick Byrne, an analyst at JP Morgan, said Magnusson's departure might indicate that the board members in favour of the bid were feeling less comfortable that it would go through.
"Or those board members against the bid are clearing the decks for their defence campaign," Byrne said.
Skandia's shares fell 1.2 percent to 39.80 kronor (R36.35) after Magnusson's resignation. Old Mutual's offer is valued at 43.60 kronor a share.
Shares in Old Mutual lost 1.7 percent to R15.58 on Friday. The life insurance sector closed down 0.75 percent.
Published on the web by Business Report on October 10, 2005.
