‘Parent becomes child’ as Old Mutual comes home after almost two decades

● The kudu horn will be sounded at the JSE on Tuesday for a listing that is significant for the JSE and for South Africa, bringing to fruition the more than two-year-long process in which London-listed Old Mutual plc has separated itself out into its component businesses to boost value for its shareholders.

Johannesburg-based Old Mutual Ltd, which will gain its primary listing on the JSE on Tuesday, with a secondary listing on the London Stock Exchange, houses the group’s insurance, financial services and banking businesses in South Africa and sub-Saharan Africa. It is one of two listings in the coming week to have been born out of Old Mutual plc’s managed separation process. Quilter, previously known as Old Mutual Wealth, will have its primary listing on the LSE and a secondary listing on the JSE.

Shareholders of Old Mutual plc, who include about 450 000 small retail investors in South Africa along with large South African and international institutional investors, will receive new shares in Old Mutual Ltd and Quilter on the listing, following which their existing Old Mutual plc shares will be cancelled. Later in the year shareholders in the newly listed Old Mutual Ltd will also receive shares in Nedbank, with the JSE-listed group planning to unbundle the bulk of its controlling stake in Nedbank before end-2018.

Old Mutual Ltd, which is chaired by former finance minister Trevor Manuel, is effectively “coming home” after almost two decades as the subsidiary of a London-listed company. It is one of the largest insurance companies in the country and in Africa, with more than 12-million customers, of which 6million are in South Africa. As a standalone company able to focus and grow as a local and Africa-focused group, it is expected to start to narrow the gap with its more highly rated local peers, particularly rival Sanlam.

Where Quilter will be raising capital on the market at its listing, with Old Mutual plc selling 9.6% of its shares in the UK company into the market, its South Africa-based sister company will simply list and start trading on the market on Tuesday. The company’s market value is expected to be well over R100billion, ensuring its place in the JSE top 40 and probably the top 20.

Old Mutual Ltd has R1.2-trillion in funds under management across all its businesses, making it probably the largest investor of funds in South Africa after the Public Investment Corporation, Old Mutual Ltd CEO Peter Moyo said on Friday the company would be strong on ethical investment. “As the biggest player in the market we need to start talking about being a corporate with a conscience. We want it to be known that our customers’ funds will only be invested in companies that show ethical behaviour.”

In an agreement with economic development minister Ebrahim Patel — a condition of approval for the restructuring — Old Mutual Ltd has committed to a R500-million supplier-development fund. Moyo and his team have set themselves tough targets to lift Old Mutual Ltd’s performance over the next few years. He is committed to saving R1-billion in costs by 2019 and to growing results from operations at the GDP growth rate plus 2%, while maintaining a healthy solvency level. They want to deliver a return on net asset value equivalent to the cost of capital plus 4%.

One quirk of the Old Mutual separation is, as one analyst put it, that the parent becomes the child. What remains of London-based Old Mutual plc will become an unlisted subsidiary of Moyo’s company, which will house the remaining Old Mutual plc debt but will also receive the cash from the sale of the Quilter shares.

Old Mutual wants to save R1-billion in costs and grow at GDP plus 2%