Target is still some way off

Almost a month after its new listings, the company’s managed separation has yet to unlock value

The managed separation at Old Mutual had a clear aim: to unlock value by listing independent standalone businesses and scrapping the top holding company. Almost a month after listing, that goal is still some way off.

Prior to the separation, Old Mutual Plc had a market capitalisation of R200bn. Now, with the Africa-focused Old Mutual Ltd on R133bn and Quilter on R51bn, almost 10% of the value has been lost. Avior Capital Markets head of research Warwick Bam says the decline has more to do with global macro conditions — a sell-off across emerging markets — and does not reflect stock-specific issues.

Old Mutual was expecting its share price to drop as it has exited the FTSE 100, as billions of pounds track this index. The new Old Mutual Ltd will get a prominent berth in the MSCI emerging markets index, but that isn’t much compensation.

As much as Old Mutual made a fuss about “anchoring in Africa” and tried to celebrate with green vuvuzelas in Sandton on its relisting, many observed on social media that the company had beat a humiliating retreat.

If all its acquisitions had worked out, it would have been a genuinely global financial services business — another Axa, AIG or Allianz. But Africa isn’t a bad second prize, though for now that still means SA and a couple of its neighbours. Its footprint in East and West Africa is limited, especially compared with Sanlam.

Avior’s Bam says Old Mutual can still gradually outperform its peers. “But first new investors need to understand the business in its new form, which will take a reporting cycle. Management needs to deliver on operational growth and distribute the excess capital from the wound-up holding company and the proceeds of the upcoming sale of the Latin American business.” He adds that Old Mutual needs to complete the unbundling of 32% of Nedbank, which it has promised to do within six months.

Dale Hutcheson, who runs the Absa Prime Equity Fund, says it will probably take years of impeccable financial and operational behaviour before Old Mutual gets onto the Absa Asset Management buy list.

“It made a long line of poor decisions, and how do we know that won’t persist?” he asks.

Old Mutual