adminOld Mutual had originally bought the Skandia businesses for around $6 billion towards the end of 2005, but the company has come under pressure from shareholders to divest non-core assets in order to improve returns for investors.
“The sale of Nordic to Skandia Liv represents a truly unique opportunity to create value for both Skandia Liv’s policyholders and Old Mutual’s shareholders through unlocking significant synergies from the combination of Skandia Liv and Nordic,” chief executive Julian Roberts said yesterday.
Roberts added that Old Mutual’s Skandia UK business would not be impacted by the sale, and that Old Mutual expected to complete the deal towards the end of the first quarter of 2012.
Old Mutual shares surged nearly 10 percent higher in early morning trade on the back of the planned sale. Its London-listed shares were up 9,5 percent at 121,41 pence, making them the top gainer on Britain’s benchmark FTSE 100 index.
“It’s a hugely positive announcement. It goes a long way to reducing the complexity of Old Mutual, and will make the group less geared and easier to understand,” said an analyst, who declined to be named.
Old Mutual has recently embarked on a programme of selling off businesses which it feels are no longer core parts of its operation.
It sold its American life insurance business to hedge fund Harbinger this year and remains keen on selling its stake in South African lender Nedbank.
Investors have complained that the market value of the group, which runs banking, insurance and asset management operations in 33 countries, is below the combined stand-alone value of its
businesses, weighed down by a “conglomerate discount”.
Old Mutual said it hoped that the Nordic sale would eventually be earnings enhancing, once it returned surplus capital arising from the transaction to shareholders.
Investment banks Evercore Partners and Morgan Stanley both advised Old Mutual on the deal. — Reuters.
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