Old Mutual outlines hostile Skandia bid

British-listed insurer Old Mutual on Wednesday published detailed plans of its hostile takeover bid for Swedish peer Skandia, aimed at creating Europe's eighth largest insurer.

The hostile bid valued the Swedish group at 43.5 billion kronor, Old Mutual said in a prospectus outlining details of the bid.

“Today’s document outlines significant benefits for Skandia’s shareholders from creating Europe’s eighth largest life insurer,” said Old Mutual, a South African-based company listed on the London Stock Exchange.

The takeover would create “an insurance powerhouse in four major markets – Sweden, South Africa, the UK and USA,” with some 2,600 billion kronor of funds under management.

That would make it one of the largest fund managers in Europe, Old Mutual said.

Skandia would become the group’s “senior product brand” across Europe, preserving the Swedish insurance company’s heritage.

Expected cost savings from merging the two businesses would total almost 1.0 billion kronor.

Meanwhile, Old Mutual confirmed it would maintain the independence of Skandia Liv – a mutually-run life and pension insurance subsidiary of Skandia – should the takeover succeed.

Skandia’s shareholders would retain 26 percent of the combined group’s capital and would have two representatives on the board of directors.

Although the European headquarters of the group would be in the Swedish capital Stockholm, the board of directors would be based in London, the statement added.

Old Mutual lodged a cash-and-share takeover bid at the start of September, offering 43.60 kronor per Skandia share.

“The offer price represents a 21-percent premium to the Skandia share price before confirmation of talks between the two companies,” Old Mutual said Wednesday.

“The offer is a significant increase over the average share price over the last 12 months.”

Last month Skandia said it was recommending that shareholders reject the offer which thereby became hostile.

The chairman of Swedish insurer Skandia, Bernt Magnusson, said last week that he would step down after his board rejected the bid which he had supported.

Old Mutual has also faced stiff resistance from major investors.

Shareholders controlling nearly 10 percent of Skandia’s capital have rejected the takeover offer, according to figures presented in the Swedish press last week.

Swedish pension scheme AP2 meanwhile confirmed Wednesday that it was looking at withdrawing significant investments in Cevian Capital should the Nordic hedge fund refuse to pull support for the bid.

Old Mutual has repeatedly said it is aiming for 90-percent acceptance, though it has indicated that it would be willing to pursue its takeover offer even if it does not reach that level.