Skandia's management has come out batting hard following publication of third quarter results this morning, despite Old Mutual's own Extraordinary General Meeting yesterday, which drew strong support from its shareholders to continue the hostile bid for the Swedish insurer.
More than 92% of OM shares were cast in favour of the bid, and OM subsequently announced it was extending the offer period to mid-December.
Skandia today has reiterated its stance suggesting its own shareholders will do better by rejecting the bid and remaining owners of an independent company.
Revenues were up 16% on the same quarterly period last year, although expenses were significantly up by 12%, mainly as the result of “structural costs” linked to responding to OM’s bid. Stripping out the bid costs would mean expenses increased by 7% over the period, Skandia says.
The nine-month figures published on the same International Financial Reporting Standards basis show the writing down of goodwill and restructuring costs for Bankhall have cost more than SEK1.2bn (£95m) in the first three quarters this year.
“Today Skandia is presenting a very strong interim report,” says Hans-Erik Andersson, president and chief executive officer.
”All divisions and essentially all business segments are making significant contributions to the strong improvement in underlying results. Results are exceeding all of the group’s published forecasts – for sales, funds under management, value of new business, underlying IFRS profit and the result of operations according to the embedded value method, and net asset value.”
”Our excellent result performance further strengthens our conviction that Skandia as a standalone company is a very attractive investment proposition for our shareholders, and one that is set to continue to outperform its peers in delivering strong growth in its business results.”
The results also suggest core Swedish cusstomers have not been switching to other providers as a result of the bid.
“The turnaround in the Swedish market continues. During the third quarter, new sales of unit linked assurance rose 38% compared with the same period a year ago,” the results state.
However, the battle that has already claimed a couple of key scalps on Skandia’s board following internal disagreement on how to best respond to the bid is now moving to the all-important Nomination Committee.
In line with corporate governance policy adopted in the past couple of years, Skandia has announced five new members to the committee, which is responsible for recommending a chairman to preside over the company’s Annual General Meeting, director’s fees, number of directors, election of directors, auditors’ fees and election of auditors - voted on at the AGM.
Because of the process whereby members are elected to the committee, it now pits not only institutional shareholders against each other, but also against minority shareholders on the question of whether to accept OM’s bid.
Those appointed to the committee on the basis of shareholdings at the end of the third quarter and announced on 10 October are: Paolo Pellegrini, Paulson & Co Inc., Carl Rosén, Second and Fourth National Swedish Pension Funds, Per Granström, Fidelity Investments International, Lars Förberg, Cevian Capital, and Sten Trolle, Aktiespararna (Swedish Shareholders’ Association). Skandia’s chairman, Lennart Jeansson, is a co-opted member of the committee.
Sten Trolle’s appointment comes on the basis that some 23,000 smaller Swedish shareholders have signed a form giving Aktiespararna the right to act as their proxy to register their opposition to the bid. According to the figures published by Skandia on 10 October, smaller shareholders both in Sweden and abroad accounted for 16.4% of all holdings.
At that time Fidelity had a 5% holding, Cevian had 3.4%, and the Second and Fourth pension funds had 4% together.
The Second and Fourth pension funds were among the first institutional investors to announce their opposition to the bid. Thus, there will be representatives of potentially a shade over 20% of shareholdings in Skandia on the nomination committee who are against the bid. Skandia’s board, of course, is against the bid by a majority vote.
The bulk of shareholders have not yet publicly declared thier support one way or the other. OM says it is still confident of getting the majority required to put all its plan into action, although it can still take over Skandia - albeit with some restrictions under Swedish regulations - if it obtains less than the 90% agreement rate it said it was seeking when it first announced its bid. OM has so far not announced which Skandia shareholders in particular have committed to its bid in talks, instead leaving any decision on whether to announce support up to particular shareholders themselves.
If OM is successful in its bid the positions on the committee will become academic, but if not it leaves the potential for ongoing conflict within Skandia until the next committee members are nominated on the basis of shareholdings as of the end of September next year.
|Q3 IFRS result before tax SEKm||2005||2004|
|Total underlying result||598||257|
|Restructuring costs for Bankhall||-81|
|Q1-3 IFRS result before tax SEKm||2005||2004|
|Total underlying result||1,432||647|
|Write-down of goodwill and restructuring costs for Bankhall||-1,227|
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Jonathan Boyd on 020 7484 9769 or email [email protected].IFAonline
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