Another one bites the dust
HERE’S THE GOOD. Old Mutual’s offer to the remaining 26,5% minority shareholders in short-term insurer Mutual & Federal (M&F) represents a further step in its return to its home market in South Africa after its disastrous and financially destructive foray into world markets. M&F CEO Keith Kennedy must be relieved: there’s finally clarity after having been on the Old Mutual selling list two years ago.
Here’s the bad. Despite the generous premium of around 21% Old Mutual is offering minorities on the roughly R1,8bn buyout, do M&F shareholders really want Old Mutual shares – the method it proposes to settle the transaction? Especially after the recent run-up in Old Mutual’s admittedly undervalued share price. Old Mutual is being brutally sensible in using its recovered share price to pay for M&F and what’s probably the trough of the shortterm underwriting cycle.
Here’s the ugly. That could signal the end of the short-term insurance board on the JSE, a sector that’s rewarded investors handsomely in earlier up cycles. Short-term shares are among the best investments longer term investors have enjoyed on the JSE.
Zurich Insurance SA may not be around much longer. Outgoing CEO Nic Beyers has made it clear the group would probably prefer not being listed.
Sanlam is also keen to take out subsidiary Santam and has previously indicated its intentions of trying to do so. The delisting of Santam could just be a matter of time.
Though there may be some fireworks from a few minorities at the Old Mutual/ M&F meeting, it’s really a done deal. Old Mutual says 22,5% of the 26,5% minorities have agreed to vote in favour of the scheme of arrangement.
After a couple of years of underperformance M&F is poised to make a strong