Foreign and local suitors line up to buy 75% stake in M&F

JOHANNESBURG – Foreign and local companies had shown interest in buying Old Mutual’s 75 per cent stake in JSE-listed short-term insurer Mutual & Federal (M&F), the international financial services group said yesterday.

Old Mutual had in March rejected an offer by Royal Bafokeng Holdings, the tribal investment holding firm, after the two parties disagreed on price. Matthew Gregorowski, the head of media relations at Old Mutual, said the process to start selecting the buyer would begin next month, but the firm would not disclose the names of the new suitors at this stage.Asked whether Old Mutual intended to sell the stake at the original price, Gregorowski would only say: “We have set a minimum price, but that is commercially confidential.”In the initial announcement last November, Old Mutual said that the indicative offer for the stake was N$27,50 a share, valuing M&F at more than N$8 billion.The shares rose 1,87 per cent to N$15,79 yesterday.Keith Kennedy, the chief executive of M&F, said the local and offshore interest in the stake was registered shortly after it became public knowledge that M&F was up for sale.Attempts to get comment from Royal Bafokeng yesterday were unsuccessful.Speaking at the company’s half-year results presentation, Kennedy said M&F’s board had been informed by Old Mutual that it wanted to initiate a competitive sale process this year.”They call it competitive because when talks were going on with Royal Bafokeng, the tribal holding company was the only company allowed to bid for the stake at the time,” he said.Rajay Ambekar, a portfolio manager at Cadiz African Harvest, said suitors for the stake could be anyone.”This is quite a sizeable stake.It needs someone with a lot of cash.Maybe private equity companies may be interested,” Ambekar said.In the six months to June, M&F said investment income fell 52 per cent to N$278 million due to lower returns on listed equities and reduced holdings as the company disposed of some investments to pay a special dividend of nearly N$600 million in December.Kennedy said: “The first half has been difficult due to a turn in the cycle and an unusually large number of fires.We recognise the cyclical nature of short-term insurance results.”M&F’s interim net income slid 67 per cent year on year to N$147 million.Gross premiums rose 2 per cent to N$4,69 billion.Insurance claims have climbed at M&F and Santam, its bigger rival, since 2005 as fires and floods have destroyed more buildings.The cost of repairing vehicles has risen because South Africans bought imported cars with more luxury features and rising prices of spare parts.Last month Kennedy said that M&F planned to cut a fifth of its staff, offering packages to 600 staff in a bid to lower costs.Business ReportMatthew Gregorowski, the head of media relations at Old Mutual, said the process to start selecting the buyer would begin next month, but the firm would not disclose the names of the new suitors at this stage.Asked whether Old Mutual intended to sell the stake at the original price, Gregorowski would only say: “We have set a minimum price, but that is commercially confidential.”In the initial announcement last November, Old Mutual said that the indicative offer for the stake was N$27,50 a share, valuing M&F at more than N$8 billion.The shares rose 1,87 per cent to N$15,79 yesterday.Keith Kennedy, the chief executive of M&F, said the local and offshore interest in the stake was registered shortly after it became public knowledge that M&F was up for sale.Attempts to get comment from Royal Bafokeng yesterday were unsuccessful.Speaking at the company’s half-year results presentation, Kennedy said M&F’s board had been informed by Old Mutual that it wanted to initiate a competitive sale process this year.”They call it competitive because when talks were going on with Royal Bafokeng, the tribal holding company was the only company allowed to bid for the stake at the time,” he said.Rajay Ambekar, a portfolio manager at Cadiz African Harvest, said suitors for the stake could be anyone.”This is quite a sizeable stake.It needs someone with a lot of cash.Maybe private equity companies may be interested,” Ambekar said.In the six months to June, M&F said investment income fell 52 per cent to N$278 million due to lower returns on listed equities and reduced holdings as the company disposed of some investments to pay a special dividend of nearly N$600 million in December.Kennedy said: “The first half has been difficult due to a turn in the cycle and an unusually large number of fires.We recognise the cyclical nature of short-term insurance results.”M&F’s interim net income slid 67 per cent year on year to N$147 million.Gross premiums rose 2 per cent to N$4,69 billion.Insurance claims have climbed at M&F and Santam, its bigger rival, since 2005 as fires and floods have destroyed more buildings.The cost of repairing vehicles has risen because South Africans bought imported cars with more luxury features and rising prices of spare parts.Last month Kennedy said that M&F planned to cut a fifth of its staff, offering packages to 600 staff in a bid to lower costs.Business Report

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