Old Mutual to list standalones in SA and UK

OLD Mutual is building up cash at its London head office as it prepares to strengthen the balance sheets of the two standalone companies, in South Africa and the UK, which it plans to list next year.

The group, which is breaking itself up into its component parts, is on track to list the newly created Old Mutual Ltd on the JSE and Old Mutual Wealth on the London Stock Exchange as soon as possible after it announces its full-year results next March.

The group, which reported on Friday a 37% increase in adjusted operating profit, also expects to close its London head office next year as it delivers on its promise to “materially complete” its managed separation process by the end of that year.

Old Mutual has sold noncore assets in the US, Italy and India and has paid down a big chunk of debt.

It had pro forma cash of £1.23-billion (about R21-billion) on its balance sheet at the end of June, up from £743-million (R12.8-billion) at the end of December, and will inject some of that into the two new companies to ensure they have appropriate balance sheets and are able to meet regulatory requirements. But analysts are hoping there will be enough left over for a substantial cash payout to Old Mutual shareholders.

Chief executive Bruce Hemphill said it would be “inappropriate” at this stage to look at whether there would be a special dividend or other cash payout.

The group is working to get the “day one” balance sheets of the new companies right and will provide details at its investor day in November. It has approached regulators and started making the necessary regulatory filings.

Avior Capital Markets analyst Warwick Bam said he had factored “ex- ecution risk” into his forecasts for the managed separation but, in his view, a large chunk of this risk had fallen away with the sell-off of assets in the US, India and Italy, which had given the group more flexibility and would reduce potential regulatory concern.

The new JSE-listed company to be spun out of the group, Old Mutual Ltd, will be chaired by Trevor Manuel, with Peter Moyo as CEO.

It will hold the group’s South African and emerging markets operations, including its 53% stake in Nedbank, which will be unbundled to shareholders after the new company is listed. Old Mutual Ltd is expected to have a market value of at least R110-billion but could be worth much more, with some analysts estimating it is currently valued in the Old Mutual share price at a discount of more than 30% to peers such as Sanlam.

Old Mutual Wealth is estimated to be worth at least £2.5-billion to £3-billion, and the group said on Friday that next year’s listing in London could include an initial public offering element.

“We have strong businesses which we will deliver directly into the hands of shareholders and we will deliver them in good shape,” Hemphill said. — BDLive