Old Mutual’s Asset Management Unit Attracts Possible Buyersby
Insurer plans to split into four separate units by 2018
Expressions of interest may not lead to purchase, company says
Old Mutual Plc, Africa’s largest insurer, said it has been approached by companies interested in buying a stake in its U.S.-based fund management unit.
“Old Mutual confirms that it has received approaches from third parties to acquire its stake,” in OM Asset Management Plc, the London-based insurer said in a statement on Tuesday. There’s no certainty that the interest will lead to a purchase, it said.
The company plans to split into four separate units by 2018. The asset-management unit, made up of boutique fund managers, sold shares to the public in New York in 2014 and its parent company holds almost 66 percent of the stock, according to data compiled by Bloomberg.
Old Mutual is close to selling the entire stake to Affiliated Managers Group Inc. in a deal valued at about $1 billion, the Financial Times reported, citing two unidentified people familiar with the matter.
A sale to a single buyer “is by far the preferred course of action,” said Risto Ketola, head of financials coverage at SBG Securities in Johannesburg. “I would prefer Old Mutual to take all cash even if it results in a small discount versus a share deal. That way the flexibility for the remaining break-up steps will be greatest.”
Old Mutual rose as much as 1.6 percent in London and was 1.5 percent higher at 169.8 pence as of 10:28 a.m. The insurer has declined 5.1 percent this year, making it the best performer on the eight-member FTSE 350 Life Insurance Index which has dropped 13 percent. OMAM, which is valued at $1.67 billion, has fallen 9.5 percent this year.
Chief Executive Officer Bruce Hemphill, who took the job in November, said in March he plans to split up the company to reverse years of flagging returns. The insurer will spin off its controlling stake in South African lender Nedbank Group to shareholders and separate OMAM, its U.K. wealth operations and its emerging-markets unit by the end of 2018.
An initial public offering for the wealth unit is “probably” the right thing to do, Ketola said. “Stock market ratings for wealth-management businesses are high, probably much higher than what trade or private-equity players are prepared to pay at this stage. Old Mutual still has quite a long process ahead in terms of current technology projects and that might also put off private-equity interest in the business.”
The emerging-markets unit, with holdings that include Old Mutual South Africa and property and casualty insurer Mutual & Federal, may be listed in Johannesburg after the breakup, Old Mutual South Africa CEO David Macready said on April 20. That structure may also be able to house some of Nedbank’s shares, Michael Goemans, the chief financial officer of Old Mutual South Africa, said at the same meeting.