Mutual & Federal/Old Mutual. OUR MUTUAL FRIEND MAKES A FEW NEW ENEMIES.

(From Financial Mail)

Byline: Stephen Cranston

Mutual & Federal/Old Mutual OUR MUTUAL FRIEND MAKES A FEW NEW ENEMIES It depends on how M& F's value is calculated There has been some bad publicity for Old Mutual (OM) recently, with fraud charges against Gary Pilgrim and Harold Baxter, founders of its US mutual fund business, and the evident failure of its benign neglect policy towards Nedcor.

But the most recent controversy is self-inflicted. OM has been accused of forcing minority shareholders in Mutual & Federal (M& F) to sell their shares at R17,50, which is considered by some to be a sharp discount to fair value.

The second-largest shareholder in M& F, UK insurer Royal & Sun Alliance (R& SA), with 37,1% of the shares, is keen to exit from noncore businesses. It has chosen to do so while the rand remains relatively strong, and it can realise GBP100m for its investment.

Old Mutual finance director Julian Roberts says that as OM would then hold 86,1% of the equity, it presented an opportunity to delist M& F and turn it into a wholly owned subsidiary.

Controversially, OM is not making a normal S440 offer to minorities, which requires a 90% majority to force through a delisting. Instead it is making use of the scheme of arrangement, which needs only 75% acceptance.