Johannesburg - Old Mutual plans to separate its four units as Chief Executive Officer Bruce Hemphill breaks up the UK financial services company to reverse years of flagging returns.
The insurer will separate OM Asset Management, its controlling stake in South African lender Nedbank, its UK wealth business and the emerging-market business run out of South Africa by the end of 2018, London-based Old Mutual said in a statement on Friday. The separation will be done in a way to maximise value to shareholders and give the different businesses more room to expand, it said.
The breakup culminates a strategic review started by Hemphill after his appointment in November as the 171-year-old company’s main South African operations come under pressure amid slowing economic growth and a depreciating local currency. A split makes sense as Old Mutual trades at a discount to the combined value of its different units, which have few synergies between them, said Risto Ketola, an analyst at SBG Securities in Johannesburg.
“Our new strategy will allow each business to have simpler access to capital markets to fund its growth more easily and be valued more appropriately, with more straight forward regulatory arrangements,” Hemphill said in the statement. “These businesses are performing strongly, have excellent competitive positions in sizable markets and the underlying growth potential to flourish independently.”