An­other one bites the dust

Finweek English Edition - - Insight -

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

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