Old Mutual Confirms Split Into Four Separate Businesses

Mar 11 2016 | 10:37pm ET

Global financial services group Old Mutual has disclosed plans to split into four main businesses in response to changing global regulations and the belief that markets will value them more highly as separate companies than as components of a conglomerate.

Old Mutual Wealth, one of the four businesses alongside Old Mutual Emerging Markets, Nedbank Group and U.S.-based OM Asset Management, contains £24 billion investment manager Old Mutual Global Advisors.

The division could command a strong valuation as a stand-alone business, according to Reuters, with estimates ranging from $6-$7 billion and private equity companies such as Cinven and Warburg Pincus already circling. 

The breakup is expected to be complete by the end of 2018, according to a company statement. "We have four very strong businesses that can reach their full potential by freeing them from the costs and constraints of the group,” noted Old Mutual CEO Bruce Hemphill in a media conference call. “There is little commonality and limited rationale for them to be combined." 

The step is Hemphill’s most radical after joining Old Mutual last November with a mandate to unlock “trapped” value in Old Mutual’s various businesses. One plan for the breakup involves separate market listings for the Emerging Markets and Wealth businesses, although no decisions have been made. Nedbank and OM AM are already publicly traded and will be largely spun off to shareholders. 

The company will close its London headquarters as part of the breakup, noted the statement, saving more than $110 million in annual overhead costs. There will be staff reductions as a result, although Hemphill declined to go into details except to say that once the breakup is complete, his would likely be one of the positions made redundant.

“Our new strategy will allow each business to have simpler access to capital markets to fund its growth more easily and be valued more appropriately,” said Group chairman Patrick O'Sullivan in the statement. “After much careful thought, we have taken the important decision that the best interests of shareholders will be served by enabling these businesses to chart independent courses over the medium term.”

Proceeds from the spinoffs and any eventual public offerings will be used to pay dividends and reduce debt, the company said. 

Old Mutual traces its heritage back to the 1845 founding of South Africa-based Mutual Life Assurance Company. However, its disparate businesses lack synergy and face both different regulatory regimes and unique funding requirements, making their combination unwieldy and ultimately less efficient. The company’s share price has thus trailed that of its peers for the past several years.

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