IT HAS been like pulling teeth, this Old Mutual deal with Skandia. It has taken six months to get to today’s incomplete position, but it is all the more frustrating because key players have failed to agree terms at the same time as never wholly disagreeing either.



And still the agony persists. Yesterday Old Mutual said that it had received acceptances from 68.6 per cent of shareholders in Sweden’s biggest insurer. Those shareholders unwilling to accept the terms offered may reflect on the fact that they are destined to be in a minority and will be unable to dictate terms. But they seem set in the decision to obstruct and that means Old Mutual will have to maintain a corporate edifice and listing for Skandia, which carries cost and hassle factors.

In the end, however, the agonising events of the past six months have been more frustration than genuinely painful. And in the end the Old Mutual/Skandia amalgamation makes good sense. For one thing, Old Mutual achieves greater geographic diversification. There is very little wrong with its South African business, but it carries political and currency risks and the appeal of the company will be enhanced if those risks are diluted.

Although Skandia is known as Sweden’s largest insurer, two thirds of the premium income is in the UK. Post-deal, Old Mutual will have chunky business in Britain, Sweden, and continental Europe to complement similar-sized businesses in South Africa and the United States.

It is hardly disastrous if Old Mutual fails to secure complete ownership of the Skandia. The procedural consequences are likely to be no more than annoying and if it buys only three quarters of Skandia it has only to shell out three quarters of the capital. At the same time those minority shareholders in Skandia who think that the company is being sold too cheaply have a chance to share in the upside.

Old Mutual and Skandia both operate on the so-called “open-architecture” approach, and that presents opportunities to win economies of scale. More importantly, it also sits well with current customer preferences.

You only need to look at the share price chart to see that the market sees more pleasure than pain in this deal. Having run up 35 per cent in the past three months, Old Mutual shares look fully valued in the context of current profitability. But shares are well worth holding nonetheless.

Anglo American

INVESTMENT bankers, flush with memories of last year’s deal-making bonanza, have turned their eyes to Anglo American. The London-based mining house, which owns stakes in industry giants such as De Beers and AngloGold Ashanti, promised late last year to clean out its stable, and bankers are clamouring for a slice of the action. At stake could be more than £5 billion-worth of assets, although Anglo American said yesterday that no deals had yet been done.

However, the first group of bankers has been appointed. Citigroup will arrange the sale of Anglo American’s 79 per cent stake in Highveld Steel, a South African business worth £900 million that has attracted the attention of Lakshmi Mittal, the steel magnate, and India’s Tata Steel group. Anglo American also wants to reduce its 51 per cent stake in AngloGold Ashanti, but claims that no decision has been made on exactly how much it wants to retain. The shareholding is worth about £4 billion and Anglo American, advised by Goldman Sachs, is likely to retain a significant stake, at least in the medium term.

The third key element to the restructure is the likely demerger of its Mondi paper and packaging unit. Mondi is a sizeable business worth up to £3 billion and has helped Anglo American to diversify at times of low metal prices. With most analysts expecting the mining sector to enjoy boom times not seen since immediately after the Second World War, Mondi is best offloaded and proceeds invested into strengthening Anglo American mines.

Anglo American has underperformed its main rivals, BHP Billiton and Rio Tinto, which has prompted investors to push for the stable clean-out. It is three months since Tony Trahar, chief executive, first announced the clean-out and the time has come to deliver on his promise. Anglo American’s shares have enjoyed a spark since Mr Trahar’s October pronouncement but will need some action soon to underpin their recent strength. Mr Trahar will want restructuring to be a key component of his Anglo American legacy, and is unlikely to disappoint. Hold.

Aga Foodservice

WHEN Aga Foodservice was demerged from Glynwed in 2001 it was mostly a UK business. William McGrath, the chief, decided that it should reduce exposure to the UK consumer but overseas expansion for a company of Aga’s relatively small size is often fraught. Yet Aga has proved the Jeremiahs wrong. It was not the first time Aga spoke of its overseas successes yesterday but sales outside this country are now chunky enough to balance its UK business.

Some might think that Aga would be hit by the weakening consumer confidence over the past year or two. But while high street spending has slowed, it seems that consumers to find the cash for things they really want or need. There is a chance Aga is doing no more than taking advantage of what may be only temporary enthusiasm for spending on kitchen furniture. But it is more likely that it is helping to create that market and has the capacity to sustain it. Commercial kitchens are now on Aga’s radar. This will be a tricky market to crack. But assume the company can prove the doubters wrong again. Buy.

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