Old Mutual (OMU) has been active in the past week. From its Private Equity arm looking to purchase Long4Life (L4L) to its previous chief executive Peter Moyo’s lawyer wanting to see the directors jailed, the company has had its fair share of coverage.
But the main news is the unbundling of 62.89 percent of its remaining holding in Nedbank Group (NED), taking its interests down from 19.4 percent to 7.2 percent of total holdings. Unreal to think that Old Mutual OMU has been a majority shareholder in NED for the past 35 years, acquiring 52 percent of Nedcor Limited back in 1986.
What is an unbundling?
An unbundling is basically a transaction whereby one company distributes its equity stake (the shares it holds) in another company back to its own shareholders, as their management team believes it will be able to unlock more value and create better returns for shareholders in that way.
This has been part of Old Mutual’s “Managed Separation Process”, which kicked off in March 2016, when its board decided that following the process would increase shareholder value by separating the four businesses then owned by the group. It believed that the structure at the time trapped value and inhibited the efficient management and funding of the growth and potential of the four strong individual businesses comprising the Group.
It broke Old Mutual up into its four core businesses: (1) Old Mutual Limited (previously called Old Mutual Emerging Markets) (2) Nedbank, (3) Quilter plc (previously called Old Mutual Wealth UK), and (4) BrightSphere Investment Group (previously called OMAM in the US).
All the above have been completed, with Nedbank Group (NED) being the last leg of the transaction.
What does this mean for OMU shareholders?
For every 100 OMU shares that you hold, you will receive 1.32 NED shares.
There are also positive knock-on effects, to quote Nedbank Group: “The Old Mutual unbundling will result in a number of benefits to Nedbank Group and its stakeholders and shareholders, which include, amongst others, an increased free-float of Nedbank Group shares, with the effect of increased liquidity along with a more favourable position in relevant indices.”
The average analysts’ target as recorded in Bloomberg suggests that OMU has 14 percent upside with NED at 12.7 percent upside.
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BUSINESS REPORT ONLINE