The Fourth National Swedish Pension Fund (AP4) said on Tuesday it will reject the R38-billion offer by South African insurer Old Mutual to purchase Skandia Insurance Company, making it the second state pension fund to do so after Skandia’s board would not recommend the offer the shareholders.
The AP4 fund, which holds about 1% of Skandia’s votes and shares, cited the same reasons as those of Skandia’s board for rejecting the offer, AFX reported from Stockholm. Last week, the Second National Pension Fund (AP2), with a 3,2% stake in Skandia, also turned down Old Mutual’s bid.
“The reasons given by Skandia’s board of directors are shared fully by the fund,” said AP4 on Tuesday.
Specifically, AFX reported, the fund added that the Skandia board’s rejection of the bid makes it hostile, and that Skandia has set out a credible case for continuing as a standalone operation.
The fund also said it sees risk in a bid that will be paid for in the form of newly issued shares in Old Mutual.
“Since the major part of that company’s cash flow and profits are generated in South Africa, the currency risk and political risk inherent in the offer appear to be abnormally high,” it said.
Old Mutual CEO Jim Sutcliffe said last week that Old Mutual had approached shareholders representing more than 60% of Skandia’s shares, the “vast majority” of whom had offered positive indications on the merits of the offer.
Old Mutual is offering Skandia shareholders 43,60 Swedish kronor per share. For every 100 Skandia shares tendered, each Skandia shareholder would receive 1Â 650 Swedish kronor in cash and 137 new Old Mutual shares.
An independent fairness opinion by ABN Amro, commissioned by Skandia’s board to assess the offer, found it to be fair from a financial point of view.
A merger between the two companies would create Europe’s eighth-largest insurance company by embedded value, and seventh in terms of assets under management. — I-Net Bridge