Points to note about Old Mutual plc’s managed separation

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HARARE (FinX) – Old Mutual Zimbabwe shareholders on Tuesday approved the set-up of dividend access trusts as part of processes Old Mutual plc is pursuing to manage its separation. The dividend access trusts were also set up in Malawi and Namibia

At an extraordinary general meeting, shareholders also approved to an increase of the company’s share capital and an amendment to the Memorandum of Association among other processes the group required to make its separation manageable.

Aggregated points to note about the managed separation:

  • Two years ago, after a management change, the board of Old Mutual Plc announced the re-organization of the group in two phases. The first was to improve overall business performance and the second was to deliver a Managed Separation of the group. This is the first kind in recent times.
  • The main reason for the dismantling of the group arose from the fact that with increased regulatory complexities in the United Kingdom, the group structure which combined insurance, banking and asset management had become onerous and inefficient and an unprofitable drain on the group’s capital resources.
  • Old Mutual Plc had a good performance in 2017, spurred on by a strong H2, benefitting from strong capital markets and exchange rates. Adjusted Operating Profits of GBP 2 billion were up an impressive 7% in constant currency terms and 22% in reported. EPS was 24.3p and a second interim dividend 3.57p per share was declared. Underlining the strong performance was 6% growth in the adjusted NAV which closed the year at GBP12 billion.
  • Old Mutual Plc was a combination of four major businesses;

-1. A majority stake (52%) in listed South African banking group; Nedbank

-2. A non-listed but quite successful United Kingdom (UK) wealth management firm.

-3. A majority stake in a listed United States bases asset management company; (OM Asset Management).

-4. An emerging markets insurance company headquartered in South Africa; Old Mutual Emerging Markets. With Brexit and increased regulation, it became necessary to unwind the current structure, as such a road map for the Managed Separation was set as;

  • Keep and concentrate on Old Mutual Emerging Market (OMEM), which will be listed on the JSE and LSE. The company has head office in South Africa and operations in 17 countries.
  • Unbundle and list through a 9.6% IPO the UK Old Mutual Wealth Management Unit (now called Quilter).
  • Demerge the stake in Nedbank to a 20% minority position through a dividend in specie to shareholders. The time table is that this will be done 6 months after the listing of OMEM which will be known as Old Mutual Limited and Quilter Plc.
  • After the successful separation anticipated to be completed in 18 months’ time, investors will have shares in the following;

-1 Old Mutual Ltd – this will essentially be the South African domiciled and biggest life assurance company in South Africa, with dominant operations in a number of African countries, including Malawi, Namibia and Zimbabwe. The company is well capitalized and profitable.

-2 Quilter Plc – a wealth management firm with £114.4 billion under management and profits of nearly £100 million. The company will be listed on the LSE.

-3 Nedbank Ltd – the fourth largest bank in South Africa with subsidiaries in a number of countries including a 20% shareholding in Ecobank ETI.

  • Old Mutual has already set up Free Share Dealing Services which enables shareholders who hold Old Mutual plc shares in Certificated Form on the Zimbabwean register to sell the Old Mutual Limited Shares to which they will become entitled as a result of the proposal to finalise the Managed Separation of Old Mutual plc using the Corpserve Registrars.
  • To be eligible to sell shares one must:

-be an Eligible Free Share Dealing Service participant that holds Old Mutual plc Shares in Certificated Form on the Zimbabwean Register at the Second Scheme Record Time, being 6.00 p.m. (London Time) on 25 June 2018; and

-hold 1,500 or fewer Old Mutual plc Shares at the Second Scheme Record Time and therefore be entitled to receive 1,500 or fewer Old Mutual Limited Shares after the Second Scheme Effective Time.

  • Quilter will list on the London and Johannesburg stock exchanges on 25 June, with Old Mutual to de-list on 26 June. Quilters  share price range will fall between £1.25 ($1.60 €1.40) to £1.55 leading to a market capitalisation of between £2.4bn and £2.9bn. Re-listing will take place on the JSE