Old Mutual’s unbundling of Nedbank is imminent

In the same way that markets go through cycles, so too does sentiment. At one stage on the JSE, it was all the rage to build investment holding companies with several underlying investments. The reverse is now true, with investors applauding decisions to unlock value and simplify corporate structures.

Old Mutual has been through a lot in recent years. As part of its managed separation in 2018, the group decided to hang on to its stake in Nedbank. This was done to appease the regulators and give support to the capital structure of OMLACSA (Old Mutual Life Assurance Company South Africa).

Old Mutual is now unbundling a stake of 12.2% in Nedbank, which means it will hang on to around 7.2% in Nedbank. Old Mutual shareholders will receive shares in Nedbank that they used to own indirectly via Old Mutual.

All regulatory approvals have been obtained and the unbundling ratio has been announced: for every 100 Old Mutual shares, an Old Mutual shareholder will receive 1.31954 Nedbank shares.

This will take place on the morning of 8th November, so the market cap of Old Mutual will drop significantly on that day as the group will effectively become smaller. Old Mutual shareholders will see Nedbank shares appearing in their portfolios which will make up for the gap.

In case you were wondering about the decimal places in that ratio, it’s known as a “fractional entitlement” and will be settled in cash.

Year-to-date, Old Mutual is up nearly 35% and Nedbank is up around 25%.

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