Johannesburg - Old Mutual on Tuesday provided clarity to the market on its proposed restructuring, with its share price gaining 3 percent.
It said its preferred option after splitting into four would be to have two of the new firms listed on both the London and Johannesburg exchanges.
Old Mutual said in March it planned to break itself into four parts. The company expected to complete its restructuring by the end of 2018. The changes included carving out its emerging markets operations to create a new South African holding company and a company that would mainly comprise wealth operations.
It would spin off a significant portion of its stake in Nedbank to investors, leaving the company with a strategic holding in the lender through Old Mutual Life Assurance, the insurer said in a statement.
It would pursue a demerger of its wealth businesses and continue reducing its 65.8 percent stake in Old Mutual Asset Management, which would be used to reduce debt, it said.
“It is highly complex,” said chief executive Bruce Hemphill. Old Mutual “will continue to interrogate options as they come to us”. Hemphill said in March that he planned to split up the company to reverse years of flagging returns.
Hemphill said the firm had also received approaches for its businesses from industry and private equity players. “We are still going through a process,” he said. “We have settled on a preferred route, (but) that does not preclude… someone coming along with an offer.“
Old Mutual had received interest in various assets, mainly for US-based OM Asset Management and Old Mutual Wealth, the UK wealth business, and would consider any offer that made sense, Hemphill said. Old Mutual Wealth was valued by analysts earlier in the year at £3 billion (R61bn) to £4bn.
He declined to comment on the sale of Old Mutual Wealth’s Italian unit – which attracted four private equity bidders in its final stages, sources said.
Cleaning up
But he said Old Mutual was going through a process of “cleaning up” the Italian wealth business. The UK’s vote to leave the EU would not affect the company’s plan to have the separation completed by the end of 2018, although it might affect underlying businesses because of increased volatility, Hemphill said.
As part of the process, Old Mutual had cut 15 percent of its permanent workforce at its London headquarters, with more reductions expected, the company said.
Hemphill said despite market fluctuations following last week’s referendum vote, Britain was still a “sure bet” in the longer term. “We’re in for an extended period of rand weakness, increased volatility and lower equity markets, all three of which will impact our operating results.”
While gross sales have been strong, it would incur one-off expenses related to capping of exit fees, and larger-than-expected claims in its South African property and casualty and corporate businesses.
Reuben Beelders, an analyst at Gryphon Asset Management, said the statement yesterday provided more clarity on the way ahead for Old Mutual. The reduction in the numbers of workers at its London headquarters would also please shareholders as it had been considered too expensive.
Nedbank shares added 3.36 percent yesterday to R183.87 and Old Mutual gained 3.43 percent to R37.65.
BUSINESS REPORT