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Patel prepares red carpet for Old Mutual emerging market HQ

Jan 10 2018 19:39
Yolandi Groenewald

Johannesburg - Minister of Economic Development Ebrahim Patel has welcomed Old Mutual's decision to establish South Africa as the base for all its emerging market operations. 

On Wednesday the Competition Tribunal heard arguments relating to Old Mutual Ltd’s takeover of control of Old Mutual plc. The takeover of control is part of a restructuring process.

The Competition Commission on Tuesday issued a recommendation to the Competition Tribunal for the newly incorporated Old Mutual Ltd to acquire Old Mutual plc.

In a statement Old Mutual said this was a significant step towards the listing of Old Mutual Ltd as a stand-alone entity this year.

The tribunal was widely expected to rubberstamp the approval, as Patel and the Economic Development Department (EDD) had participated closely in the negotiations to establish a deal and conditions for the Old Mutual comeback.

Earlier Old Mutual Ltd was established to facilitate the internal reorganisation and managed separation of the Old Mutual Group, which will see the group’s emerging markets activities now residing in South Africa.

The investment firm first announced its "managed separation plan" in March 2016. It was to separate Old Mutual's four constituents - Old Mutual Emerging Markets, the Nedbank Group, Old Mutual Wealth, and Old Mutual Asset Management – into stand-alone entities.

Old Mutual Emerging Markets will be headquartered in SA.

After winning the necessary approval, Old Mutual Ltd will now be able to list on the JSE, and will house Old Mutual Emerging Markets and what is left of Old Mutual after the unbundling.

Conditions set by the Competition Commission include that R500m be allocated to a new ring-fenced Enterprise Supplier Development Fund.

Further public interest commitments by Old Mutual, made in terms of the Competition Act, include undertakings not to retrench any workers as a result of the transaction and to ensure that the company achieves best-of-class empowerment status within a prescribed time.

In a statement the Competition Commission said it had assessed the internal restructure of the firms within the Old Mutual group of companies and concluded that the transaction was unlikely to substantially prevent or lessen competition in any market in South Africa.

“However, the EDD, as part of its statutory mandate to consider the public interest implications of any merger notified to the competition authorities, filed a notice of intention to participate in the transaction and subsequently agreed, with the merging parties, a list of commitments to be undertaken by the group as part of the restructuring process,” the commission stated.

The Competition Commission is not opposed to the imposing of these commitments as conditions to the approval of the transaction. This is because the EDD is of the view that these commitments address the public interest concerns it had raised.

While the tribunal hearing only took place on Wednesday, Patel already on Tuesday welcomed Old Mutual's home-coming as well as the agreement on jobs, empowerment and the R500m small business development.

Patel said he welcomed the decision by Old Mutual to make SA the primary base for all of its emerging market activities and its commitment to a range of public interest undertakings.

“The move ‘back home’ of one of our premier financial institutions will help to inject investor confidence in the economy,” he said. 

“It is a well-timed signal that we can grow the economy in the period ahead and unlock the country’s potential of job creation and economic inclusion.”

He said the decision to establish a R500m fund - following discussions with the ministry - to drive the growth of small business and employment, is a significant part of the company’s commitments.

“We look forward to the new jobs that will be created in the SA economy - particularly within small businesses - by the Development Fund,” Patel said.

The transaction has the support of the Competition Commission in terms of the Competition Act and has been recommended to the Competition Tribunal for consideration and approval. Thereafter it will be subject to shareholder approval.

“We are excited about the homecoming of Old Mutual back to Africa,"said Peter Moyo, CEO-designate of Old Mutual Ltd. 

"Old Mutual partners with its customers and the communities in which it operates to build financial well-being, and, through financial inclusion, to enable inclusive economic growth."

The transaction will also have to be presented to shareholders for approval.

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