OLD MUTUAL and Nedbank Group shareholders should be aware of the likelihood of volatility in the share prices of the two groups early in November, when Old Mutual unbundles a 12.2 percent stake in Nedbank, said PSG Head of Equities Vaughan Henkel.
He said yesterday in a telephone interview that Nedbank currently accounts for 12.5 percent of the net asset value of Old Mutual, and on or by November 3, Old Mutual’s share price is likely to be volatile and may eventually settle anywhere between 10 and 13 percent lower.
In terms of the unbundling, Old Mutual shareholders will receive approximately 1.31954 Nedbank ordinary shares for every 100 Old Mutual ordinary shares held on the expected record date of November 5, 2021.
Nedbank’s share price might also drop, as Old Mutual shareholders might sell the Nedbank shares they receive from the unbundling to buy more Old Mutual shares.
Henkel suggested that shareholders should use the opportunity to buy more Old Mutual shares, if they wished to do so.
He said that traditionally share prices of holding companies did not drop the full extent of the net asset value decline arising from an unbundling.
On a more general note, he said Nedbank had posted a “fantastic” financial performance in their recovery from the Covid-19 pandemic last year.
Old Mutual, like the other insurers, had suffered from high mortality claims through the pandemic, but the insurers were well provisioned against further losses as the third wave eased in South Africa, and they were well run and had strong balance sheets, he said.
Old Mutual’s share price fell 1.7 percent to R15.65 yesterday afternoon, which was nevertheless a healthy improvement in the share price of R10 a year ago.
Nedbank’s share price increased 0.9 percent to R177.26 at the same time yesterday, and the share price has risen strongly from R101.88 a year ago.
Old Mutual’s unbundling of a 12.2 percent stake in Nedbank Group would mark a total distribution to Old Mutual shareholders worth about R10 billion.
The unbundling furthers a managed separation process that started in 2018 when Old Mutual had a majority shareholding in Nedbank.
The latest transaction will leave Old Mutual with a minority 7.2 percent interest in Nedbank in the shareholder funds of Old Mutual Life Assurance Company, a wholly-owned subsidiary of Old Mutual.
The unbundling allows investors to participate in the different investment merits of Old Mutual and Nedbank, provides a return of capital to Old Mutual shareholders, and supports the efficient allocation of capital by Old Mutual through the retention of a minority stake in Nedbank, both group’s said at the announcement of the merger.
For Old Mutual, the focus was to simplify the business and focus on core operations.