London-listed financial services group Old Mutual has announced it is to split its business into four separate entities in a drive to cut costs and for its shares to be valued more “appropriately” on the stock market.
The group, which has £303.8bn (€391.5n) of funds under management, is to be separated into Old Mutual Emerging Markets, Nedbank, Old Mutual Wealth and OM Asset Management.
These will be an African financial services company, an African bank, a UK-based wealth manager and a US-listed multi-boutique asset manager, respectively.
Old Mutual grew out of a South African mutual insurer founded in 1845 and moved its headquarters to London in 1999.
Since then, it has bought and sold a number of financial services companies from various countries, including Swedish insurer Skandia, which it acquired in 2006, subsequently selling and re-naming parts of that business.
Bruce Hemphill, Old Mutual’s group chief executive since November 2015, said: “The strategy we have announced today sets out a bold new course to unlock value currently trapped within the group structure.
“We have four strong businesses that can reach their full potential by freeing them from the costs and constraints of the group.”
Hemphill said that, despite the group’s previous strategy, which led to a de-risking and re-shaping of the group, Old Mutual shares still traded at a substantial discount to those of its peers and to the sum of its parts’ value.
He said, if one looked closely at the divisions, they had very little in common and there was limited rationale for them to be in one group.
“It’s a costly structure with insufficient synergies to justify those costs,” he added.
Additionally, regulatory change had added – and would add – extra complexity, Hemphill said.
The company said the new strategy around the split involved a new capital-management policy intended to cut group holding company debt and reduce central costs in stages.
Hemphill said the new strategy would give each business have simpler access to capital markets to fund its growth, and be valued more appropriately.
“We are announcing today a strategy that will allow us to release the potential within the group for the benefit of all its stakeholders for many years to come,” he said.
Hemphill said customers of its divisions would unaffected by the split.
“This process will not impact our customers, and our excellent levels of service will be unchanged,” he said.
“On the contrary, the businesses will be able to take better advantage of their exciting prospects and will continue to deliver great outcomes for our customers.”
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