Seven months after it announced its intentions, Old Mutual has finally secured enough Skandia shares to take control of the business.
The offer to shareholders to tender their shares has been extended to January 12, but 62,5% of the shares have already been tendered. The cost to Old Mutual so far is R24bn (to illustrate the scale of the offer, that's more than Liberty Life's entire market cap), of which 60% (R14bn) is in shares and 40% (R10bn) in cash. There will be a dilution in Old Mutual's value and earnings per share in the short term, but Skandia will provide it with a lower cost of capital and a higher growth rate.
The deal catapults Old Mutual into the 10 largest shares on the JSE, overtaking Telkom and AngloG old Ashanti.
And even more shares will be issued before the offer closes. Old Mutual CE Jim Sutcliffe says that he has talked to a number of investors, such as index funds, who could not tender their shares until Old Mutual achieved majority control.
Old Mutual needs a two-thirds majority to change the board. The takeover still needs final regulatory approval - and to help the settlement, Sutcliffe hopes Old Mutual will have its secondary listing in Stockholm.
He expects the final regulatory hurdles will be cleared just after New Year. As soon as the offer is concluded, he will call for an extraordinary meeting to change the Skandia board. It is expected that Sutcliffe and his finance director, Julian Roberts, will stand for election. As is the case with subsidiaries Nedbank and Mutual & Federal, they will count as non executives from a Skandia perspective.
Publicly, Sutcliffe and Roberts are still aiming for 90% acceptance. Sutcliffe admits that if Skandia remains listed, it will not be possible to rationalise the two head offices as much as he had hoped.
"But Skandia had planned to cut its head office costs by £35m, around half of what we hoped to do, and we will aim to implement this," he says.
In any case there are few operations which Old Mutual planned to merge. The biggest will be the Skandia Wrap business in the UK and Mutual's Selestia, which both offer investment products based around a range of unit trusts. Sutcliffe says the plan is to keep both brands and only to merge the businesses "if it makes sense to the financial advisers who use the products". There is also scope to rationalise the two businesses focused on the expatriate market, Old Mutual International and Royal Skandia, though Sutcliffe says this is less pressing as they operate in different markets.
In spite of the hostility of the Skandia board and of its CEO, Hans-Erik Andersson, to the deal, Sutcliffe says he hopes that the management teams will work well together.
"We aren't serial acquirers or asset strippers, and we all have a duty to our shareholders and customers. In particular, I think that Skandia's management in the UK, which is the biggest part of the business, is quite supportive."
It seems unlikely, however, that Andersson can stay after being so vociferously opposed to the deal. Appointing a new Skandia CEO will be an urgent task.
