Old Mutual to cut share in Nedbank to minority
Johannesburg - Old Mutual moved to assure investors and shareholders that Nedbank would remain a key part of its holding.
Old Mutual finance director Ingrid Johnson said the bank would not be sold and that the shake-up announced by chief executive Bruce Hemphill last week was part of a restructuring but would not result in Nedbank being lost from the group.
Johnson said the exact mechanism to achieve any reduction in Old Mutual’s shareholding in Nedbank Group was yet to be finally determined.
“Nedbank is not for sale,” Johnson said. “We are simply reducing Old Mutual’s majority stake in the bank.”
In 2010 HSBC Holdings, a British multinational banking and financial services company, tried to buy 70 percent of Nedbank for $6.8 billion (R103.4bn) but the deal failed to materialise. Old Mutual and HSBC said then that the talks about a possible buy had expired before the companies could reach an agreement.
“There was a time in 2010 when Old Mutual considered selling to HSBC. However, since then Nedbank has done well under the leadership of Old Mutual and it has realised its full potential,” Johnson said, noting that it made business sense for Old Mutual to keep a 20 percent stake in Nedbank.
She said it was, however, premature to speculate about how big the minority stake would eventually be after 2018.
Last week Hemphill ended speculation on Nedbank’s future by announcing that the 54 percent controlling stake that Old Mutual held would be reduced into a minority stake by the end of 2018.
Hemphill also announced that Old Mutual would be split into four businesses: Old Mutual Emerging Markets, Old Mutual Asset Management, Old Mutual Wealth and then Nedbank.
He said the split was the culmination of a strategic review started in November when he took over Old Mutual.
“Old Mutual currently envisages reducing its shareholding in Nedbank primarily by way of a distribution of Nedbank shares to the shareholders of Old Mutual in an orderly manner and at an appropriate time in the managed separation,” Hemphill said. “It does not intend to sell any part of its shareholding in Nedbank to a new strategic investor.”
Vestact analyst Sasha Naryshkine said even though Old Mutual and Nedbank did not form part of their portfolio, the decision taken by Old Mutual was understandable from a business point of view.
Naryshkine said: “If investors were looking for less generalised financial services businesses and more niche business that are more nimble, the newer machine could attract much higher valuations, and by extension improve shareholder returns. We have gone from a time of great excesses globally to a time of regulators putting the foot down, requiring fewer risk taking opportunities for financials.”
On Friday ratings agency Moody’s Investors Services announced that it was reviewing Old Mutual’s ratings for downgrade following action on the South African sovereign.
Moody’s placed the Baa1 insurance financial strength (IFS) rating of Old Mutual Life Assurance, the A2 IFS rating of Old Mutual Wealth Life Assurance Limited and the Baa3 senior debt rating of Old Mutual on review for downgrade.
“We have seen this depressed economy before but South Africa is a fantastic economy. We are going to get over this. Currently there is a good dialogue between the public and private sector and both parties want the best for the country,” Johnson said.
Old Mutual’s shares on Friday fell 3.15 percent to R40.