JOHANNESBURG. From a South African horizon Skandia´s board and many Swedish shareholders look like quite a pathetic bunch, using any rotten old argument to disguise their xenophobia – blinded, and unable to judge the potential advantages of an Old Mutual (OM) takeover.
The latest furore being that OM had not mentioned some of the risks in the Swedish version of the prospectus. The major drama has however circled around OM´s South Africaness, when in many ways Old Mutual’s proposal actually create a whole new, favorable revenue situation for both companies and a whole new balance of power among shareholders – less South African, less Swedish, more international.
If anything, therefore, Old Mutual´s South African shareholders are stiffening their initially ambivalent support for OM´s Skandia bid. Besides that they see a lot more sense than the Swede´s to merge the two entities and create the eight largest assurance company in Europe with a combined market value of some € 14 billion (SEK 110 billion, ZAR 93 billion) they also want recognition.
The New World beating the Old World. The Second World beating the First World. Africa hitting back on old slave trade money. Whatever sentiment lurks behind it, for OM it is now a race against time. Within a month shareholders will vote on the offer, OM has to find a way to stop the momentum among Swedish shareholders. By now 14.5 percent of the shareholders have said an emphatic no (some did it before the prospectus was published). The latest to join the virtual no-campaign is Nordea Fonder (Mutual funds).
Most of the nay-sayers have two things in common, they are Swedish and they represent either Swedish state controlled pension funds or small shareholders.
But it is probably too little too late. Another 35.5 percent of shareholders must join this largely patriotic bandwagon – to save Skandia from becoming a foreign owned company.
What counts against the Swedish shareholders is that the majority of Skandia is already in foreign hands, about 57 percent, and most of those are likely to vote with their wallet rather than with their heart.
The Swedish sentiment is clearly that Skandia is worth saving. It may have fallen into disrepute from a management embezzlement scandal a few years ago but it should now be forgiven.
Certainly if the alternative, as the sentiment goes, is to be sold to some second rate life assurer from Africa. The “Africa” bit, it must be said, has a hint of racism, though such forbidden sentiments are well hidden behind words like “risk”.
The South African´s are, unsurprisingly looking at it from another angle. Instead of focusing on the 14 odd percent that are against, they are discussing how big a majority Old Mutual will get.
As it will not be able to reach the crucial 90 percent, and swallow Skandia wholesale, the focus is now on getting 75 percent, and still be able to move HQ to London and do a fair amount of restructuring in order to save the promised € 100 million. And if 75 percent proves tricky the bottom line is 50. It will do as a starter – Old Mutual have already spent enough time and money, the figure € 100 million is the likely cost if the bid is successful, and it is too late to step back.
What may put some Skandia shareholders off is that the deal, which started as a friendly one has now turned hostile. Old Mutual could not put together a complete prospectus, with full accounting of future revenues and a complete balance sheet, after Skandia´s board had said no to the bid.
In a way Old Mutual was taken by surprise by the hostility. The deal, according to Old Mutual´s version, took off after Morgan Stanley had been given the go ahead by Skandia to round up some potential buyers.
Then it´s the issue of price. Most of the no-sayers are unhappy with the price. But the top three shareholders – US fund Fidelity, Iceland´s Burdaras and Swedish hedge fund Cevian Capital are however pleased with the SEK 43.60 kronor offer. An offer that Skandia’s (now fired) advisors also Morgan Stanley were happy with.
The top shareholders see clear synergies and underlying values that more than compensates for the odd krona back or forth. Old Mutual takes no risks at this stage. In a full page in Swedish business paper Dagens Industri, which largely has reflected the negative sentiments among Swedish shareholders, CE Jim Sutcliffe gives his reasons why the offer should be accepted. Sutcliffe´s own position is probably not at stake. Shareholders, the majority are South African institutions, know full well that Old Mutual needs to take some calculated chances and they have accepted that Skandia is a good deal for them.
But a lost bid, will certainly not be advantageous for Old Mutual, it would have to go back to square one and start all over. It would be a lost year.
The same could be said for Skandia. But it does not have the cash to defend itself so the next suitor will be a lot more difficult to fend off.
It would save both parties’ time and effort if Old Mutual tops up the offer a bit. That way it is likely to win over the balance of the Skandia shareholders.
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