Old Mutual’s small listing surprises US
OLD MUTUAL’s planned listing of just 18.3% of the shares in its US-based asset management business on the New York Stock Exchange was lower than expected, analysts said.
The market was expecting the insurer, which is listed in Johannesburg and London, to list 30%50% of Old Mutual Asset Management, said Ron Klipin, portfolio manager at Cratos Wealth, on Tuesday.
“Old Mutual’s philosophy in finally bringing the IPO to the market is right, but it is just the quantum that has disappointed the market,” he said.
Old Mutual said on Tuesday it intends to sell 22-million, or 18.3%, of Old Mutual Asset Management’s ordinary shares at $15-$17, raising $330m-$374m.
A further 3.3-million shares are available in an over-allotment option, bringing the expected total to be raised to $430.1m.
WJ de Vries, an analyst at Avior Capital Markets, told Bloomberg: “What surprised me a bit is that it’s only selling 18.3%, so the free float won’t be great, which may limit demand.”
The US unit is a global, multiboutique asset management company which has headquarters in Boston, with about $215bn in assets under management at the end of June.
Old Mutual bought the company in 2000, which was made up of 42 institutional asset management firms that operated more or less independently.
Old Mutual has streamlined the business into seven boutique managers. The US business contributed 7% (£111m) of Old Mutual’s 2013 profit.
According to Bloomberg, the listing would value the US unit at $1.87bn at the top of the pricing range, or $2.15bn if additional shares are sold.
Mr Klipin said it was unclear why Old Mutual had listed only 18.3% of the business. “Maybe they see value to be unlocked down the line,” he said.
Old Mutual has been moving away from insurance to become a broader financial services company, similar to Sanlam, he said.
“The IPO is an ongoing part of restructuring at Old Mutual in terms of getting rid of noncore assets,” Mr Klipin said.
“There has always been a bit of uncertainty in the market as to whether they can achieve their objectives, but they are well on their way to doing that,” he said.
In the wake of the global financial crisis, Old Mutual has been disposing of a number of its assets. The group’s shareholders have benefited, receiving a £1bn special dividend after Old Mutual sold the Skandia Nordic division for £2.1bn.
Old Mutual has not committed to a shareholder payout after the US listing.
The insurer said earlier this year that the purpose of the offering was to “enhance US Asset Management’s financial and operating flexibility to deploy capital to continue to grow and develop further its multiboutique asset management business”.
Old Mutual’s share price fell 1.46% to close at R33.93 on Tuesday. In comparison, the financials index fell 0.96% on the day.