Old Mutual four way split comes to life; lists on JSE, LSE, ZSE, MSE & NSX

Old Mutual press release:

Old Mutual Limited listed on the Johannesburg Stock Exchange (JSE) with a standard listing on the London Stock Exchange (LSE) and secondary listings on the stock exchanges of Malawi, Namibia and Zimbabwe.

The listing is the result of Old Mutual plc’s Managed Separation strategy, which was announced in March 2016, to separate the London-based group into four independent, standalone companies.

The foremost aim of this strategy is to unlock value that was trapped within the Group structure and remove costs arising from the London-based office, and in so doing create better long-term value for shareholders.

To effect the managed separation process, two separately listed entities were established:

  • One is the new South African holding company, Old Mutual Limited (OML), which consists of Old Mutual’s Emerging Markets business, Old Mutual’s 54% holding in Nedbank and the residual Old Mutual plc, that is, the remaining assets and liabilities of the business post the managed separation.
  • The other one is Quilter plc, which is the former Old Mutual Wealth UK operation that listed on the London Stock Exchange, with a secondary listing on the JSE on 25 June.

The remaining two businesses in the group are already independently listed entities: namely the Nedbank Group, which Old Mutual Limited plans to reduce its shareholding to 19.9% by the end of the year; and the former Old Mutual Asset Management company based in the US, whose majority shareholding was reduced to 5% as part of the managed separation process.

Peter Moyo, Chief Executive Officer of Old Mutual Limited, said: “What’s most exciting about our listing as an independent, standalone entity is that it enables us to unlock shareholder value and create a business with a strong strategic focus on sub-Saharan Africa.

“Our investment case is strong and compelling. Our business remains highly cash generative and is well-positioned in the right markets to drive added value from our franchises. We are privileged to have a business with a robust capital and liquidity position, which will provide the right springboard to become a leading Pan-African financial services business.

“Exciting opportunities lie ahead for us at Old Mutual Limited and we look forward to delivering sustainable profit growth and returns for our shareholders, and making meaningful contributions to the societies in which we operate. By driving long-term economic growth in Africa, we can positively impact the lives of all our customers and communities on the continent.

“It is important that we reassure our customers that they will continue to be in the same capable hands, and that the day-to-day running of our business will continue as usual.

Their investments and policies, and our product offerings, will not be affected by Managed Separation and our listing. We will remain a financially strong, well-capitalised and well-governed business with capabilities that position us well to meet the changing needs of our customers in various segments across Africa,” concluded Moyo.

Old Mutual Returns to Africa as Breakup Ends London Listing

By Roxanne Henderson and Thembisile Dzonzi

(Bloomberg) – South Africa’s prodigal insurer returned home to a luke warm welcome on Tuesday.

Old Mutual Ltd. started trading its stock in Johannesburg at 28.50 rand before swinging between R28.20 and R29.39. The listing – done in conjunction with others in Namibia, Malawi and Zimbabwe – brings an end to a global acquisition spree that took its former parent Old Mutual Plc from its Cape Town roots to London, New York, Beijing and even Bogota.

The 173-year-old insurer on Monday spun off UK wealth manager Quilter Plc and has sold its US asset manager and Latin American units after concluding the divisions would be worth more on their own. That left Old Mutual Ltd. with its former parent’s African insurance, asset management and banking businesses, while also drawing to a close Old Mutual Plc’s 19-year listing on the London Stock Exchange.

The share price isn’t yet reflecting the “value unlock” Old Mutual hoped to achieve, said Renier de Bruyn, an investment analyst at Sanlam Private Wealth. Still, this means the stock is trading at an “attractive” price-to-earnings ratio of 7.5 times, he said. That compares with a historical P/E of 13 for Sanlam Ltd., its biggest South African rival.

Almost 2.4 million Old Mutual Ltd. shares had traded by 10:47 a.m. in Johannesburg, more than three times the volumes seen in Sanlam, MMI Holdings Ltd. and Discovery Ltd., with the securities priced at R28.60.

Strategy Shift

The break up serves as a reminder that Old Mutual Plc could never really shed its African heritage. The South African business continually accounted for the bulk of earnings despite an acquisition spree which included the purchase of Stockholm-based Skandia AB for about $8 billion in 2006 and Boston-based United Asset Management Corp. for $1.4 billion in 2000.

“Old Mutual’s strategy of trying to build a completely global business I think clearly has failed,” said Brad Preston, chief investment officer at Mergence Investment Managers Ltd. in Cape Town. “We’ve seen them reverse that completely.”

Old Mutual’s approach, which saw it bulk up mostly in developing markets, contrasts with that of Sanlam. Cape Town-based Sanlam started trading its shares in Johannesburg in November 1998, about seven months before Old Mutual moved its headquarters to London and listed its stock in the U.K. capital. Over that period, Sanlam’s stock returned almost 2,000 percent, while Old Mutual’s Johannesburg-listed securities returned about 480 percent.

“Sanlam has certainly out performed and executed incredibly well over the last number of years,” Preston said. “They have executed much better on their strategy.”

Started in 1918, Sanlam focused on Africa and other emerging markets after its IPO to extend its reach to 34 countries on the continent, adding impetus to that objective with the $1.1 billion purchase earlier this year of the shares in Morocco’s Saham Finances SA it didn’t already own.

To make up ground in Africa, where Old Mutual has operations in 13 countries, Old Mutual Ltd. Chief Executive Officer Peter Moyo will focus on defending and growing market share in South Africa by revamping the company’s digital offerings. He will also improve cross-selling insurance products into its East African customer base, such as its Kenya-based micro-lender Faulu, according to the company’s prospectus.

The next step in the separation process will see shares in Nedbank Group Ltd. unbundled to shareholders in about six months. Old Mutual will retain 19.9% in the Johannesburg-based lender.

The shares will probably remain constrained because the listing undervalues Old Mutual Ltd.’s businesses, said Michael Porter, a trader at Unum Capital in Johannesburg. “We do expect some selling pressure on it but if you’ve got a medium- to long-term hold you should benefit out of it.”