A split Skandia board has today rejected a takeover bid from Old Mutual as directors argue it is a poor deal for shareholders.
Second story to follow...
Three directors put forward a "dissenting opinion", recommending shareholders accept the offer but they were outweighed by the eight directors voting to reject the offer.
Key reasons cited the board for rejection of the offer are:it does not take into account the benefits of Skandia's 'Turbo plan' to boost business in the 2005-7 business plan period;it undervalues Skandia's market position;combining OM and Skandia lacks "industrial logic in many respects";synergy benefits could be largely carried out by Skandia on its own;the value of new business is said to be rising and "Skandia is in the midst of an interesting phase of development";the company says it is active in a savings market which is expected to grow, and where there is not expected to be much in the way of consolidation pressures;Skandia has a good finacial position;OM's indication it would divest SkandiaBanken in the Swedish market is a move which would significantly weaken Skandia in the Nordic market;any negative reaction from Nordic customers would significantly dent Skandia's profitability, including from its local life insurance business Skandia Liv;the value of the offer is too low;the high proportion of the offer made in shares means Skandia shareholders would be taking on the risk of OM shares declining in value, as well as the risk that comes with foreign exchange controls still in effect in South Africa - OM's core market, andOM's debt position would be worsened by a takeover of Skandia.
Contradicting these points are those made by the three directors who have argued shareholders accept the offer. Their reasons are:the offer represents a reasonable premium on the estimated value of Skandia;shareholders with small numbers of shares who are being offered payment through a so-called 'Mix and Match' facility proposed by OM would get shares with better key financial ratios, such as earnings per share;the dividend yield would be four times higher for shareholders who accept the offer;OM shares are "an attractive form of payment";the large number of Skandia shareholders outside Sweden means the offer needs to be considered on an international basis;Skandia would benefit from a larger capital base;confidence in Skandia by IFAs would be strengthened by having "a distinct and long-term industrial owner";Skandia faces increasing competition, a position which would be helped by OM's bigger cashflow;there is limited geographical overlap between Skandia and OM;the Skandia Liv business would remain run on a mutual basis with a particular place in the Skandia group;the Turbo plan carries risks associated with the amount of capital required to carry it forward, andthe stock market has already discounted the value of the Turbo plan.
The board confirms in its statement today that it will "not take any action to frustrate the offer" in line with pronouncements on details of the offer process under Swedish law made by the Swedish Securities Council.
OM stated last Thursday that it would proceed with the bid regardless of any rejection by Skandia's board.
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