Skandia presents argument against Old Mutual bid

Swedish insurance company Skandia outlined for shareholders on Wednesday its case against a hostile takeover bid by British-listed Old Mutual, saying Skandia would develop better on its own.

Skandia’s management board rejected the bid in September, and on Wednesday the group presented details of how the company plans to proceed as an independent group.

“The board of Skandia believes that the standalone plans for the company offer greater value, and that the offer represents an inadequate premium for Skandia shareholders,” it said.

“The Old Mutual offer is insufficient to compensate shareholders for surrendering control of a business with such compelling and attractive growth prospects to create shareholder value,” Skandia chairman Lennart Jeansson said.

Skandia’s president and chief executive, Hans-Erik Andersson, said he saw “tremendous opportunities to create value in the years to come.”

Meanwhile in London, Old Mutual said it remained “convinced of the compelling industrial logic” of the takeover.

“Old Mutual remains firmly of the opinion that the combination of the two businesses will greatly enhance growth and reduce risk to shareholders through stable industry ownership,” it said.

The bid by Old Mutual, which is aimed at creating the eighth-biggest insurance group in Europe, values the Swedish company at about 43.5 billion kronor.

Old Mutual said initially that it was aiming for 90 percent acceptance of the bid, but about 15 percent of Skandia shareholders have rejected the offer so far, and Old Mutual has since indicated it would pursue the bid with less.

The Swedish group said on Wednesday that Old Mutual was overstating the value of its offer by including its interim dividend in its calculations.

Skandia also rejected the Old Mutual offer on the grounds that it is made up of 60 percent in Old Mutual shares, which Skandia said are exposed to markets with a more uncertain outlook.

Skandia said Old Mutual may be subject to significant currency and other risks and Old Mutual’s insurance business has various unattractive risk exposures which Skandia shareholders may want to avoid.

“The proposed combination lacks strategic logic for Skandia and may represent significant risk,” Skandia said.

Skandia provided further details on its so-called Turbo Plan, approved by the board in May, which identifies cost-reduction opportunities and synergies within Skandia over and above the 2005-2007 business plans.

It estimates that the plan will deliver 1.2 billion kronor of increased profits per year over the next five years.

Skandia said that since it has improved profitability recently and many of its growth businesses were reaching “critical scale,” this would be an unwise time to sell.

It said the Nordic business had turned around and was delivering strong profit and sales growth, while the British, Asia-Pacific and offshore business continued to grow strongly.



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."