Shares in Old Mutual fell by 5 per cent from 129p to 122.75p after the South African firm said it was in early discussions. Man Securities equities analyst Trevor Moss says it is not clear whether Old Mutual is after Skandia’s UK business or the rest of its European operations as well. He says if Old Mutual were to buy the whole business, there are several Swedish banks which would be interested in the Swedish arm. Skandia also has operations in Western Europe, including Germany and Italy but these markets are relatively undeveloped so Moss says it is uncertain whether a buyer could be found. Oriel insurance analyst Roman Cizdyn understands Old Mutual is after the whole Skandia business. He says buying Skandia’s European business would lead to Old Mutual being an international business instead of having a South African and US bias. He adds that several UK companies, including Prudential, have tried to enter European markets and failed. Cizdyn says: “The danger is if Old Mutual buys Skandia for 3.5bn, they only have 1bn in cash so they may knock their valuation by having to issue a lot of stock to raise the money. Old Mutual is valued at 4.7bn but the market could conceivably take 1bn off the value of the combined businesses. One of the key points is there are no synergies between the two companies which means that they would have to save all the money by cost-cutting. It is a big gamble for Old Mutual.” Old Mutual finance director Julian Roberts has been reported to no longer be interested in the UK institutional business of Deutsche Asset Management or in making a UK buy. Old Mutual and Skandia refuse to comment.