Shareholders in the two companies that will come out of Old Mutual’s break-up may get extra cash via special dividend payouts after they list in London and Johannesburg in June.
The two new listings, which will see Old Mutual plc shareholders receive three Old Mutual Ltd and one Quilter share in exchange for every three Old Mutual plc shares they own, will bring Old Mutual’s London foray to an end, almost 20 years after the group demutualised and set up as a public limited company in July 1999.
The group, which held what is expected to be its last annual general meeting in London on Monday, was on schedule and below budget with the managed separation strategy it embarked on just over two years ago, Old Mutual plc chairman Patrick O’Sullivan said.
Its shareholders will vote on the demerger on May 25, with UK courts ruling on the transaction on the same day.
The Old Mutual plc share price opened on Monday at a all record high of £2.60. CEO Bruce Hemphill took over and started to put in place the managed separation strategy in 2016.
The share price has climbed since the group set dates for the two new listings in mid-March, reassuring investors who had been sceptical about whether the break-up would be implemented as promised by the end of 2018.
Sizeable incentives
Hemphill and his senior colleagues are set to receive sizeable incentives for completing the break-up and putting themselves out of a job, but the full amounts are tied in part to how much value the managed separation unlocks and will be determined only by the end of 2019, based on how the two newly listed companies perform after their listings on June 25 and 26.
Analysts have been wondering whether the group would dish out some cash to shareholders, in addition to the Quilter and Old Mutual shares they are due to receive.
Hemphill made it clear in an interview on Monday that any special payouts would be up to the boards of the new independent companies.
UK wealth management business Quilter (previously Old Mutual Wealth), which will have its primary listing on the London Stock Exchange with a secondary listing on the JSE, has been set up without taking into account the £600m from the sale of its Single Strategy business, proceeds of which will be received only in the second half of the year.
Quilter’s board has said that it will consider a special dividend payout.
Old Mutual Ltd, which houses the group’s sub-Saharan African banking, asset management and insurance businesses, will come home to SA with a primary listing in Johannesburg and a secondary listing in London. It has sold businesses in India and Latin America to focus on Africa.
Proceeds of about $300m from the sale of the Latin American businesses are due to come in only later in 2018.
Hemphill said the Old Mutual Ltd board, which is chaired by former finance minister Trevor Manuel, would have to decide on its risk appetite and capital requirements.
Old Mutual plc has paid back about £930m of debt but is left with just less than £400m of listed debt, which runs off only by 2025, so the company will continue as an unlisted subsidiary of Old Mutual Ltd, with a slimmed down board of its own, which will make the final decisions about how much Hemphill and others with incentives linked to the managed separation will receive by the end of 2019, as well as about how much longer they need to stay once the public limited company is delisted.
Their incentives were designed to compensate them for the fact that their tenures at Old Mutual plc would be short but demanding. The London head office has already been slimmed down from 300 to about 100 people and may close by early 2019.
Though it is likely to take time for share prices to settle down after the two new listings and the Nedbank unbundling, the break-up is widely expected to result in a value uplift for shareholders, as the two companies move closer to the ratings of some of their peers.
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