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Cape Town – As part of the Old Mutual Plc managed separation process, Old Mutual Limited (OML) will list on the JSE as a primary listing and in London as a secondary listing as soon as possible after the release of Old Mutual Plc’s 2017 results, Nedbank Group CEO Mike Brown told Fin24 earlier this week.
The Old Mutual managed separation process is expected to be materially concluded by the end of 2018.
He explained that Nedbank's ultimate parent company, Old Mutual Plc, is in essence a head office in London which owns four big businesses around the world. In South Africa it owns Old Mutual Emerging Markets and 53.5% of Nedbank, in the UK it owns Old Mutual Wealth (now called Quilter) and in the US it owned an asset management business which has already been sold.
"The Old Mutual managed separation strategy is to say that, instead of these assets being held through a costly and inefficient head office structure in London, they will each be owned more directly by shareholders in their own markets thereby reducing costs and unlocking conglomerate discounts to create value for shareholders," said Brown.
Old Mutual is 'coming home'
"This is a good news story for South Africa of Old Mutual 'coming home'. At the appropriate time after the listing of OML on the JSE, it will distribute the majority of its Nedbank shares to its shareholders so that OML will reduce its shareholding in Nedbank to a strategic minority of 19.9%.
"After many years of discussing the issue of Old Mutual’s ownership levels in Nedbank, there is now finality."
OML will continue to be a strategic shareholder in Nedbank to underpin ongoing cooperation between the businesses, but won't have a controlling stake any more.
"For Nedbank this is largely a shareholding transaction. We have not 'scrambled the egg' by mixing up the brands or IT systems, so there is no 'big divorce' or 'divorce settlement' having to happen. We always remained a self-sufficient, independent bank with an independent board," said Brown.
He explained OML does not want to keep the controlling stake in Nedbank largely because of the evolution of financial services regulation. Essentially, since the global financial crisis, the rules of financial regulation make it increasingly expensive and complex to hold a controlling stake in another large financial services company.
He explained OML does not want to keep the controlling stake in Nedbank
largely because of the evolution of financial services regulation, which since the global financial crisis has made it increasingly expensive and complex to hold a
controlling stake in another large financial services company.
"One would, therefore, expect to find fewer and fewer financial services conglomerates. The regulatory costs of holding a controlling stake in another company have increased, while holding the smaller strategic minority stake does not have the same onerous regulatory costs as being the controlling stakeholder.
"At the same time, this will have no impact on OML’s ongoing strategic collaboration with Nedbank," added Brown.
On Thursday Old Mutual announced a 22% jump in pre-tax profits in 2017, saying it “improved the performance of the underlying businesses and set them up for continued future growth”. The company said its pre-tax adjusted operating profit grew to £2.0bn for the year to end-December 2017, up from £1.7bn in 2016.
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