Old Mutual lodges Skandia bid

British-listed insurer Old Mutual said Friday it had lodged a cash-and-share takeover bid for Swedish insurer Skandia to create one of the Europe's top 10 insurance giants.

Old Mutual said it was offering 43.60 kronor per Skandia share, valuing Skandia at 44.9 billion kronor.

If successful, the operation would create a combined Old Mutual/Skandia group worth 7.9 billion pounds with 192 billion pounds under management, “a powerful combination”, Old Mutual said.

In terms of embedded value the Old Mutual/Skandia group would be the eighth-largest insurer in Europe, and in terms of assets under management, it would be number seven, it said.

The two groups have little geographical overlap, with 75% of Old Mutual’s current business conducted in Africa, 20% in the United States and 5% in Britain and the rest of the world, while Skandia’s core markets are in Scandinavia and Britain.

“The industrial logic of this combination is truly compelling,” Old Mutual chief executive Jim Sutcliffe said.

Old Mutual stressed that it was seeking the approval of the Skandia board by September 23, without which it would not go through with the offer.

Skandia said in a statement that its board would study the details of the offer before making a recommendation to shareholders, but company officials were not available for further comment.

Shareholders controlling a total of 15.6% of Skandia’s capital had already pledged their holdings to the offer, Old Mutual said.

Old Mutual is a South African-founded company with the majority of its shareholders still in its home market, but its primary listing is on the London Stock Exchange.

Both companies have been talking about a link-up since May, but reports have said that the Skandia board remains divided on the issue.

For every 100 Skandia shares tendered, shareholders will receive 1,650 kronor in cash and 137 Old Mutual shares.

The offer represents a premium of 25% over Skandia’s share price in May, when Old Mutual overtures to the Swedish company became first known.

However, it is only marginally above Skandia’s latest share price of 42.10 kronor when the stock was suspended earlier on Friday pending Old Mutual’s statement.

After resuming trading, Skandia shares were quoted at 41.50 kronor in closing Stockholm trading on Friday, below the bid price, suggesting that investors were not convinced that it would be successful.

Stockholm analysts were not, however, willing to comment on the operation while they studied its details.

Old Mutual, which plans to finance the acquisition with its own cash reserves and loans, saw its shares decline a quarter of a penny to 144.25 pence in London after its announcement.

Old Mutual said it would aim for pretax cost savings worth an annual 70 million pounds as a result of the planned link-up.

The new group would seek a secondary listing on the Stockholm stock exchange, in addition to London, it said.



Scania review board dissects Volkswagen bid

The independent committee looking at Volkswagen's take-over bid of Swedish truck giant Scania began its work on Tuesday, stating promises that headquarters would remain in Sweden were paramount.

Scania review board dissects Volkswagen bid
IF Metall Union representative Johan Järvklo sits on the independent review board. File: TT

Åsa Thunman was appointed chairwoman of the committee, which has invited financial consultants from Deutsche Bank and Morgan Stanley as well as legal advisors from Swedish law firm Mannheimer Swartling to assist them in their appraisal.

Thunman said in a statement that the committee would look at whether the $9.2 billion bid was in the best interest of Scania shareholders.

The effect on Swedish industry would also be considered, underlined committee board member Peter Wallenberg Jr.

"It has noted that Volkswagen does not foresee any significant changes with regards to Scania and that Scania’s headquarters and its development centres will remain where they are today," Wallenberg Jr. said. "These matters are of course of importance to the company and for Sweden.”

At the plant in Södertälje, employees have been busy discussing the bid. Assembly line worker Ahmed told The Local that his colleagues did not fear that production would be relocated to Germany.

"They couldn't possibly move all these machines and equipment," Ahmed, which is not his real name, told The Local on Tuesday. "But everyone on the floor has been discussing the offer."

Volkswagen tabled their $9.2 billion bid to swallow up Scania last Friday. It already owns 89 percent of Scania's voting rights and 62.6 percent of the company, with VW eager to secure the nearly 40 percent they do not own. The takeover has encountered resistance from two of Scania's minority owners, however. Both insurance outfit Skandia and pension fund AP4 have expressed reservations about selling up to Volkswagen.

“Scania’s prerequisites to maintain its leading position are better as a listed company than as a subsidiary in a larger group. Skandia doesn't intend to accept the offer," Caroline af Ugglas, head of equities at Skandia, told Bloomberg over the weekend.

Scania, which was founded in 1891 and has operations in more than 100 countries, boasts 38,600 employees. Around 16,000 work with sales and servicescross the company's subsidiaries, and over 12,000 work in production units. The company has headquarters in the Swedish town of Södertälje, where almost 6,000 employees work. The headquarters also hosts the research and development operations, with 3,300 employees.

"Changing owners won't make any difference to us in the near future," assembly line worker Ahmed said. "But we do wonder if the rules will change later on."