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Skandia squabble could open door to Old Mutual

A split between Skandia Life’s UK and Swedish management over plans to slash in 65m costs could undermine attempts to fend off a 3.1bn takeover bid from Old Mutual.

The Skandia Life board will decide whether to recommend the Old Mutual offer to its shareholders this week.

If Skandia rejects the bid, Old Mutual has signalled its intention to launch a hostile bid if necessary.

The Swedish insurance company was last week forced to release its business plan to the Swedish stockmarket. In the plan, Skandia UK’s managing director and acting head of the UK, Asia Pacific and offshore division Nick Poyntz-Wright called into question the board’s plans to cut 65m annually from costs and expressed reservations about the plan’s focus.

Skandia UK has already axed Investment Strategies as part of cutbacks at distribution subsidiary Bankhall this year.

Old Mutual says it has secured the support of 30 per cent of shareholders. It aims to make savings of 70m through the consolidation of head office functions, operational synergies and tax advantages.

Old Mutual spokesman Tony Friend says it is premature to talk about job losses and the future of Bankhall should the deal go through.

Friend says: “Our offer is compelling. It will provide better growth at lower cost and we think it will be attractive to all shareholders.”

Analyst Fox-Pitt Kelton senior vice-president Mikir Shah says: “Skandia’s cost-cutting plans do seem optimistic and might well have an impact on service levels. Perhaps this is why management is divided over the plans.”

Skandia Life was unavailable for comment.

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