Old Mutual seal take-over of Skandia
(22/2/2006)
South African insurance firm Old Mutual has finally closed its multi-billion dollar deal for Swedish rival Skandia, the parent of offshore life assurance company Royal Skandia.
The London-listed insurer declared its $6.5bn (£3.6bn) offer for the firm unconditional, after extending its offer period three times. A press release from old Mutual stated:
Old Mutual plc (`Old Mutual`) is pleased to confirm that acceptances of its Offer received between 27 January and 9 February 2006 have now been validated in respect of 179,443,781 shares in Försäkringsaktiebolaget Skandia (publ) (`Skandia`). When added to those Skandia shares that had already been acquired at the previous closing date of 26 January 2006, this brings the aggregate interest of Old Mutual to approximately 89.54 per cent of the total number of shares and votes in Skandia on a fully diluted basis.
The move obliges investors holding 72.3% of Skandia who have agreed to the deal to sell their stock to Old Mutual, giving it effective control of Skandia. Skandia`s board had rebuffed a bid from Old Mutual saying it was too low.
Despite bringing its six-month battle for control of Skandia to an end, Old Mutual`s shareholding falls just short of the 75% share it had hoped to pick up. Hitting that milestone would have allowed the firm to claim millions of pounds a year in tax breaks in the UK.
However, the group can continue to buy Skandia shares on the open market, and if it manages to accrue 90% of the firm it could force remaining investors to sell their shares and delist Skandia from the Stockholm Stock Exchange.
The takeover will allow Old Mutual to diversify away from the South African market where it earns most of its money, as well as boosting its presence in the UK where Skandia is increasing its presence.
Meanwhile, Skandia has said it will hold an extraordinary general meeting on 21 February to elect a new board. The development is likely to see board members who opposed the deal - such as Chairman Lennart Jeansson - ousted from their positions. However, remaining shareholders who are opposed to the deal could also use the meeting to push for seats on the board.
Within the offshore industry, there is speculation that the acquisition could be the beginning of the end for Royal Skandia. Old Mutual have made no secret that their main reason for purchasing Skandia was to increase their presence in the UK, primarily through the companies UK pension business.
Old Mutual downscaled its’ own offshore operations (Old Mutual International) in 1999. Two possible scenarios for Royal Skandia are that the business unit is sold off by Old Mutual or the unit could be closed to new business. If either of these scenarios does come to fruition, the policies of existing Royal Skandia policyholders should remain unaffected by events.
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