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Old Mutual carve-up paves way for stockmarket listing

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Old Mutual may seek to float its UK business following last week’s announcement of a break-up of the firm.

But experts warn that any movement will have to wait until it has handled the “mind-boggling” costs linked to its ongoing replatforming.

Old Mutual announced last week it will split its business along four lines: Old Mutual Wealth, South African lender Nedbank, the South African Old Mutual Emerging Markets business and its US institutional asset management arm OM Asset Management.

Reporting its results, Old Mutual said: “The managed separation of the group will be effected in a manner that maximises value to shareholders over time. Nedbank and OM Asset Management are already publicly traded and the managed separation may involve equity market activity for Old Mutual Wealth and Old Mutual Emerging Markets as well.”

Private equity firms Cinven, the majority shareholder in Partnership, and Warburg Pincus have reportedly made a joint cash offer for Old Mutual Wealth.

Finalytiq founder Abraham Okusanya says: “I could easily see the UK business listing on the London Stock Exchange as an independent company that would consist of Intrinsic, Old Mutual Global Investors, Old Mutual Wealth’s platform and the discretionary fund management business.”

He adds: “I would be more nervous about the idea of Old Mutual Wealth ending up with a private equity group because you know that they are going to be ruthless and try to unlock value within the business and every single part of it will need to pull its own weight.

“Old Mutual’s advice and platform propositions don’t stack up on their own, but they don’t need to be profitable as long as they funnel money into the asset management business.”

One senior industry figure, who asked to remain anonymous, adds the funds available from private equity investors may be lowered by the FCA’s recent announcement of an investigation into Old Mutual as part of its closed-book review. The source says: “It would be a very brave private equity business to pay a premium price for this at the moment.

“Private equity has been looking at Old Mutual on and off for years, and now it has a massive question mark over a regulatory action on its back books.

“But the whole value of that business is in the Skandia back-book. They had some very rich business with lots of margin from products sold in the 70s, 80s and 90s.”

At the same time, the firm also revealed costs related to its ongoing platform upgrade have ballooned to £450m.

To date Old Mutual has spent £177m – including £97m in 2015 – on the upgrade programme. The firm now predicts its total spend over six years will be between £425m and £450m.

The expected delivery date for replatforming the Wealth division has been changed from the end of 2016 to the second half of 2018, while the heritage book will now wait until 2019.

One observer describes the increase as “mind-boggling”, adding: “If Old Mutual had known this was going to cost £450m they wouldn’t be doing it. This is a disaster.”

Banks Wealth Management chartered financial planner Steven Danson says the uncertainty surrounding Old Mutual is a “concern” for advisers.

He adds: “We would be hesitant to do much business with them while this is going on.”

Expert view

One of the big issues around brand management these days is the regularity with which ownership changes. Branding was always imagined to be quite a long-term game, but who knows what Old Mutual Wealth will be called in two years’ time?

The whole business of managing brands does not fit at all well with that kind of turbulence, and that is a problem across the industry.

A lot of the brands I was working on are already disappearing. I helped to launch both the  Skandia and Selestia brands, and both have disappeared, and I do not think it will be too long before Old Mutual Wealth disappears too.

But arguably the more difficult challenge might be if it does not change hands and sticks with the name. The question then arises, what the hell is Old Mutual? One of the issues that it has always had to deal with is that it is neither “old” nor a mutual, and if you want a forward-thinking brand, those are not the words you would choose.

In this country, Old Mutual largely means Skandia to advisers, and it does not mean anything to anyone else. But with all these changes of ownership or structure coming up, there is a danger it could become even less clear – how do you build value in a blur?

Lucian Camp is founder of Lucian Camp Consulting

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