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Old Mutual unit picks banks for $3.35bn flotation – sources

The Old Mutual Wealth flotation is one of several legs in the process of splitting parent Old Mutual into four parts.

Picture: Supplied

LONDON - Anglo-South African financial services firm Old Mutual’s UK wealth unit has chosen Goldman Sachs, JP Morgan and Bank of America Merrill Lynch to lead its initial public offering next year, banking and advisory sources said.

The Old Mutual Wealth flotation is one of several legs in the process of splitting parent Old Mutual into four parts.

Before the listing, Old Mutual Wealth plans to sell its single-strategy asset management division, Old Mutual Global Investors (OMGI), led by veteran investor Richard Buxton.

The IPO, which is taking place alongside a demerger of the unit in June 2018, would value the business at about £2.5 billion ($3.35 billion), assuming the OMGI sale goes ahead, two of the sources told Reuters.

Old Mutual Wealth’s pre-tax adjusted operating profit rose by 29% in the first half to £134 million.

Analysts at KBW and a second source who declined to be named said the IPO would involve 10% of the company.

Old Mutual, whose businesses including banking, insurance and asset management, has said it is breaking itself up because regulatory change makes the company too complex to run in its current form.

In addition to the planned demerger and IPO of Old Mutual Wealth, the break-up involves selling US firm Old Mutual Asset Management, listing Old Mutual’s emerging markets unit and reducing its stake in South Africa’s Nedbank.

The break-up, initiated last year by Chief Executive Bruce Hemphill within months of joining Old Mutual, will land him a maximum 1,000% bonus of his £900,000 2016 salary if completed successfully. But, with many moving parts to the process, some analysts see considerable execution risk.

Australian bank Macquarie and private equity firm TA Associates were top contenders to buy Old Mutual Wealth’s OMGI unit, two sources said, which is expected to have a price tag of about 500 million pounds.

OMGI CEO Buxton favoured the approach from TA Associates but Macquarie was seen as frontrunner by the wealth unit, they said.

Initial bids were due in by the end of September but the process has been slow and Old Mutual Wealth was unlikely to move to exclusive talks this year, one of the sources said.

Old Mutual Wealth could also choose to abandon the sale and keep OMGI, two sources said.

The US banks mandated for the IPO declined to comment. Old Mutual Wealth, Macquarie, TA Associates and Richard Buxton also declined to comment.

On Thursday, Old Mutual closed at 197.6 pence, 8.6% above the closing price on the day it announced its break-up.