Successful bid will lead to a combined group capitalisation of £7.9bn
Old Mutual has made a formal offer to acquire Skandia. The South African insurer said it has made an offer of SKR43.60 a share through a mixture of cash and shares, valuing the company at SKR44.9bn (£3.3bn). This is a premium of 25% to the share price of Skandia on 12 May this year.
According to Old Mutual, for every 100 Skandia shares tendered, each shareholder would receive SKR1,650 in cash and 137 new Old Mutual shares, which are equivalent to SKR16.5 in cash and 1.372 new Old Mutual shares per Skandia share. If the deal is successful it will produce a group with a combined capitalisation of SKR108.7bn (£7.9bn).
When International Investment went to press, Old Mutual said it was awaiting acceptance from Skandia's board of directors but had received approval from investors owning 15.6% of the shares. These included two of Skandia's shareholders - Cevian Capital (a Swedish investment firm) and Burdaras (an Icelandic investment group). The two largest shareholders are Nordea Funds with 3.5% and Fidelity with 5%.
Old Mutual claimed the takeover of Skandia would accelerate its international expansion; there is little overlap in products; it was attracted by Skandia's open architecture platforms and products; the combined group will have a major presence in South Africa, Sweden, the US and the UK, as well as critical mass and a return on investment of more than 12%.
It added that it planned to retain Skandia as the senior product brand in Europe, the Nordic and continental headquarters would be in Stockholm with the group headquarters in London. In the UK, Selestia would be integrated with Skandia's open architecture business.
It is unclear what the impact of a takeover would be on Isle of Man-based Royal Skandia and Dublin-based Skandia Ireland. Old Mutual has changed the focus of its offshore business in the past few years, which suggests the two operations could be complementary.
Guernsey-based Old Mutual International (OMI) used to operate as a traditional offshore insurer targeting expatriates and wealthy investors around the world through intermediaries. But this focus changed at the start of this century. It now targets wealthy investors in South Africa and institutional investors in Taiwan.
Since August 2004, OMI has offered its Life Account in South Africa, which has now been launched in Asia. The Elite multi-manager product is distributed through banks and institutional investors in Taiwan. Old Mutual Guernsey provides discretionary management services for the group around the world.
In contrast, Royal Skandia and Skandia Ireland are focused on expatriate investors via financial advisers and banks in Asia, the Middle East, Latin America, continental Europe and the UK. Royal Skandia also signed a joint venture in South Africa last year.
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