Old Mutual picks up

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OLD MUTUAL made a lukewarm return to the Zimbabwe Stock Exchange (ZSE) on the first day of trade after the parent company completed a restructuring process which ended its 19-year stint on the London Stock Exchange (LSE), but analysts say the share price is seen reverting to its previous levels.

By Kuda Chideme

Prior to its relisting, Old Mutual had enjoyed a fine run on the ZSE that saw its share price shoot up by more than 50% from US$3,85 last June to peak at US$7,8 last month.
Before relisting a fortnight ago, Old Mutual was trading at US$6. It was then priced at US$4,50 when it resumed trade and has gradually moved to US$4,93 as of Tuesday. The unbundling of one of the world’s largest integrated financial services providers, Old Mutual Plc, has been a welcome breath of fresh air on Zimbabwe’s usually lethargic bourse as many investors rushed to cash in on the transaction. “The dip will be temporary and is always expected with such transactions. But the market will eventually self-correct and return to the previous levels if not actually surpass them as real value is unlocked.”

“Fungible stocks such as Old Mutual are actually in demand as we go towards elections because of their ability to withhold local shocks,” a market analyst said.

The Old Mutual shares are already trading at a premium compared to their Johannesburg Stock Exchange (JSE) price because Zimbabwe’s electronic dollars are discounted against the United States dollar.

In South Africa, Old Mutual started trading at R28,50 (US$2,11) before swinging between R28,20 (us$2,09) and R28,49 (US$2,11) on Tuesday, implying a premium of 1,32 against the JSE price. A total 803 917 Old Mutual shares valued at US$4,8 million had by May 19 been transferred to the JSE and LSE share registers with investors paying a premium for the stock. Unbundling of the firm was necessary because the business had become too big for it to operate efficiently and its pricing did not reflect its underlying value.

Analysts say the strategy would allow the business, which has a strong capacity to generate cash and deliver sustainable long-term growth and returns for shareholders, to enable each business unit to enhance its performance by making each business directly accountable to shareholders. The strategy, which has been termed “managed separation”, will see the separation of its business into four stand-alone entities — Old Mutual Emerging Markets, the Nedbank Group, Old Mutual Wealth and Old Mutual Asset Management. The separation resulted in two new listings: a UK entity, Quilter and a South African entity, Old Mutual Limited (OML). Quilter started trading on June 25, while OML commenced trade a day later.

OML will incorporate the group’s African operations — Old Mutual Emerging Markets — and the group has also said that it would reduce its stake to 19,9% from 53% in Nedbank after six months of listing Old Mutual Limited.

Quilter takes over the existing Old Mutual Wealth business which is already a leading wealth management operation in the UK. According to quarterly results released in March, Quilter is currently managing in excess of US$100 billion of investors’ money. Markets have already shown confidence in Quilter with its shares gaining 8% from the set price of US$1,64, effectively valuing the business at US$3,5 billion. Apart from listing on the JSE, OML will also have a secondary listing on the LSE, as well as secondary listings on the Malawi, Namibia and Zimbabwe bourses. The transaction would see shareholders receive one ordinary share in Quilter Plc and three ordinary shares in OML for every three Old Mutual Plc shares held. They would no longer hold any shares in Old Mutual Plc.

Old Mutual Plc was founded in South Africa in 1845, but moved to Britain almost 20 years ago.

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