Old Mutual Wealth Boosts Prospects in $940 Million Deal

Old Mutual Plc, Africa’s largest insurer, agreed to buy U.K.-based Quilter Cheviot Ltd. for as much as 585 million pounds ($940 million) to accelerate its growth in wealth management and expand its client base.

Quilter Cheviot, which traces its roots to 1771, has 38,000 clients and manages 16.2 billion pounds, London-based Old Mutual said in a statement today. The acquisition will be funded by proceeds from the sales of Old Mutual’s European units and a minority stake in its U.S. asset-management arm.

“Quilter Cheviot fills a significant gap in our business, allowing us to serve better the affluent and high net worth segments,” Julian Roberts, chief executive officer of Old Mutual, said in the statement.

Old Mutual said it plans to build a wealth business managing 92 billion pounds. The purchase price includes about 42 million pounds of deferred stock for Quilter Cheviot’s managers, depending on the business’s performance. Quilter Cheviot has been owned by private-equity investors since the end of 2011. Buyout firm Bridgepoint Advisers Ltd. is exiting its investment through Old Mutual Wealth’s purchase.

“This is a smart, well-priced deal by Old Mutual utilizing the proceeds raised recently from corporate transactions of its own,” Eamonn Flanagan, a Liverpool, England-based analyst at Shore Capital, said in a note to clients as he kept his rating on Old Mutual at hold. “It forms part of a very consistent strategy,” he said, adding that the stock “is starting to look very attractive once the current volatility in investment and forex markets settles down.”

U.S. IPO

Old Mutual Asset Management Plc completed its initial public offering in New York on Oct. 15, raising a total of $483 million. Sales of insurance businesses in Germany, Austria and Poland will garner about 310 million euros ($396 million) for Old Mutual as it simplifies its operations. Its stock climbed 1.5 percent to 172 pence as of 10:45 a.m. in London trading.

By March, Old Mutual “will be able to update the market on our capital strategy with a clear picture of our surplus cash,” Roberts said in a phone interview from London today. Quilter Cheviot has about 510 employees and no major changes are planned. The wealth unit’s base is now in place and there are “no plans to do anything else” for the unit except add specialist investment management teams when needed.

With the U.S. IPO done, the purchase of 20 percent of Ecobank Transnational Inc. by Old Mutual’s banking unit Nedbank Group Ltd. underway, the sale of non-core assets completed, and expansion into fast-growing African countries achieved, Roberts has tackled some of the goals he first set out six years ago.

“As for what’s next, I have to absolutely deliver on the strategy we’ve got,” Roberts said. “We made a very large investment in Ecobank with Nedbank and that needs to work and we’re still sub scale in some of the African countries we’ve started in. But we’ve now got the building blocks we need.”

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