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

Sunday Times - - Business | Financial Services - By HI­LARY JOFFE

● 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%

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