United Kingdom- and South African-listed financial services group Old Mutual plc CEO Jim Sutcliffe has reiterated the group’s commitment to retain its 52% stake in South African banking subsidiary Nedcor, saying that the stake is not for sale and that Old Mutual is even happy to further increase its shareholding in the group.
Speaking to the media following the release of Old Mutual’s final results for the year to end-December 2003, Sutcliffe said there is “zero case” for selling its Nedcor stake.
“We have been very clear that the stake in Nedcor is not for sale,” he said.
“It is an important part of Old Mutual, providing bancassurance and other services. The two brands are much stronger together than apart, and we believe the recovery opportunities from today forward are significant.”
He added that, as a consequence of Nedcor’s new R5-billion rights issue, the group would be “quite happy” to increase its Nedcor stake further, should other shareholders opt not to follow their rights.
He indicated that the limit to its shareholding would be between 65% and 75%, as it is generally seen that a 30% to 35% float of Nedcor’s shares is required on the JSE Securities Exchange to ensure adequate liquidity for minority shareholders.
“We are committed to maintaining a viable float for Nedcor, so we wouldn’t go beyond a 30% to 35% [free] float,” Sutcliffe elaborated.
The comments come against the backdrop of increasingly frequent rumours in offshore financial circles that Old Mutual is looking to sell its Nedcor interest.
Regarding the pending charges by United States regulatory authorities and the New York attorney general’s office regarding market timing and other perceived wrongdoing by Old Mutual’s US asset management subsidiary Pilgrim Baxter, group finance director Julian Roberts said that £10-million has been provided for to cover the legal expenses and investigatory work done by Old Mutual on the case to date.
No further funds have been allocated to cover any potential fine that could be forthcoming, he confirmed.
However, Sutcliffe said that to cap Old Mutual’s potential liabilities, it has been “mutually agreed” by both Old Mutual and the Pilgrim Baxter founders that Old Mutual not make any further payments — related to the original sale of Pilgrim Baxter to Old Mutual — until the charges have been resolved. Outstanding payments stand at $69-million, which was originally due on February 28 this year.
“Until now we have not paid them, and they have agreed to this,” the CEO explained. “We are keen to have the matter reach a further stage before paying. But it is likely to be some months before the issue is resolved.”
He added that “not a lot had happened” in the case since the group’s last public statement on the matter.
Sutcliffe also said that Old Mutual remains committed to further expansion in the UK, but not at the cost of overpaying or being rushed into a deal. The group has at its disposal cash from the sale of Gerrard (more than £300-million), plus a potential £750-million should it decide to raise its total gearing level from the current 19% to about 30% — the recapitalisation of Nedcor and buyout of Mutual and Federal minorities in South Africa have had no impact on its offshore cash position.
“We have been looking, but are being disciplined about it,” he noted. “We remain committed to building a banking business in the UK and want to make an acquisition, but we will not be rushed.” — I-Net Bridge