Old Mu­tual wraps up sep­a­ra­tion

In­surer com­pletes process of split­ting four busi­nesses that made up the group and list­ing the two that were not yet listed

Business Day - - FRONT PAGE - Londiwe Buthelezi Fi­nan­cial & Busi­ness Writer buthelezil@busi­nesslive.co.za

Old Mu­tual has cleared the fi­nal hur­dle in split­ting its busi­ness into four units. The mar­ket re­acted favourably to the in­surance com­pany’s last step in its man­aged sep­a­ra­tion process, with the in­surer’s share price ris­ing 2.2% when ad­justed for the Ned­bank price on Wed­nes­day.

Old Mu­tual has cleared the fi­nal hur­dle in split­ting its busi­ness into four units.

The mar­ket re­acted favourably to the In­surance com­pany’s last step in its man­aged sep­a­ra­tion process, with the in­surer’s share price ris­ing 2.2% when ad­justed for the Ned­bank price on Wed­nes­day.

Old Mu­tual will com­plete the un­bundling of its 52% stake in Ned­bank to share­hold­ers on Mon­day. About R43.2bn will be dis­trib­uted to share­hold­ers through Ned­bank shares, which equates to nearly a third of the in­surer’s mar­ket cap­i­tal­i­sa­tion.

How­ever, Old Mu­tual will re­tain a 19.9% mi­nor­ity stake in Ned­bank. Although the com­pany’s share price fell 26% at face value to R74.21 on Wed­nes­day morn­ing when it started trad­ing with­out the Ned­bank share en­ti­tle­ment.

Karl Gev­ers, head of re­search at Benguela Global Fund Man­agers, said the ad­justed price re­flected pos­i­tive mar­ket sen­ti­ment. “The mar­ket is ap­pre­ci­at­ing Old Mu­tual. We be­lieve it is at­trac­tively priced.”

War­wick Bam, head of re­search at Av­ior Cap­i­tal Mar­kets, said Old Mu­tual was trad­ing bet­ter than ex­pected after the Ned­bank price sep­a­ra­tion.

“The mar­ket has been scep­ti­cal of the man­aged sep­a­ra­tion due to the com­plex­ity in­volved and the ex­tent of changes to the group struc­ture. Un­cer­tainty re­gard­ing the nat­u­ral shift in share­hold­ers after the Quil­ter and Ned­bank un­bundling has con­cerned in­vestors. How­ever, the share­hold­ers will set­tle within the com­ing weeks, pro­vid­ing in­vestors with more clar­ity on the val­u­a­tion of the core op­er­a­tions,” he said.

The dis­tri­bu­tion of Ned­bank shares to share­hold­ers will take place on Mon­day, Oc­to­ber 15. How­ever, Tues­day was the last day on which Old Mu­tual’s shares en­ti­tled buy­ers to Ned­bank shares. For ev­ery 100 Old Mu­tual shares held, share­hold­ers will re­ceive 3.21176 Ned­bank shares on Mon­day. Shares bought from Wed­nes­day were no longer en­ti­tled to these Ned­bank shares. This ex­plained the 26% de­cline.

Old Mu­tual be­gan its man­aged sep­a­ra­tion process in 2016 to split the four busi­nesses that made up made up the group and in­de­pen­dently list the two that weren’t yet listed.

It sold most of its 50.8% stake in the US as­set man­ager in 2017 be­fore re­brand­ing it as Bright­sphere In­vest­ment Group in March. In June, the in­surer listed its UK wealth man­age­ment busi­ness as Quil­ter and listed the African and emerg­ing mar­ket busi­ness as Old Mu­tual Lim­ited on the JSE.

Ned­bank was the big­gest driver to Old Mu­tual’s 33% in­crease in in­come from as­so­ciates in the first half of 2018. When its earn­ings con­tri­bu­tion was ad­justed for a 19.9% stake, Old Mu­tual’s in­come state­ment shows that the bank still con­trib­uted R1.3bn to the group’s head­line earn­ings.

Bam said with the fi­nal step in the sep­a­ra­tion con­cluded, Old Mu­tual’s man­age­ment can now fo­cus its at­ten­tion to­wards maximising op­er­a­tional prof­its.

THE MAR­KET HAS BEEN SCEP­TI­CAL OF THE MAN­AGED SEP­A­RA­TION DUE TO THE COM­PLEX­ITY IN­VOLVED AND THE EX­TENT OF CHANGES

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.