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The group stated it will incur a loss of between £50m and £65m for shutting down its head office and cutting off operations in London, while demerging Old Mutual Wealth and Old Mutual Emerging Markets on the London and Johannesburg stock exchanges will have the opposite effect providing increment growth of between £5m and £10m annually.
The split is due to be finished by the end of 2018.
The group has guaranteed “clear disclosure” surrounding costs and constant updates on the separation progress. It has also stated it counts on “mitigating these incremental recurring costs through capturing cost efficiencies”.
Dwelling farther on the split and emphasising on the highly complex nature of the process, Old Mutual said it is preparing OMW for independence it will review “businesses, operating models, capital and governance structures and management”.
It also described the split process as a costly one stating that the business expenses for OMW alone are expected to come to a sum of £10m.
Speaking of platforms, the development of an IT transformation programme was going at full speed, but the group has come up with a decision to “pause” its work on building the Heritage platform, as the expenses are predicted to go above £200m.
The previous month, Old Mutual reported its plans to demerge and list its UK wealth arm are going according to plan, in spite of media assuming that escalating platform expenses might wind up in a sale instead.
Bloomberg reported that South African parent Old Mutual may drop plans to list the UK wealth management unit separately, due to increasing costs involved in upgrading the division’s investment platform.
According to a report by Bloomberg, South African parent Old Mutual might quit its plans of listing the UK wealth management unit separately, because of the rising expenses required for upgrading the division’s investment platform.
This morning’s statement said: “A future-ready wealth platform, which will improve the sales of new business and the retention of existing customer assets, remains very important for OMW’s strategy.
“To simplify and de-risk the overall project and focus resources on the open book build, the building of the Heritage platform has been paused.
“In addition to the £225m spent to the end of June 2016, we estimate that the remainder of the revised programme will cost a further £200m to £225m to complete. This will mean the total cost to complete the re-platforming will be in the range of £425m to £450m, excluding any further spend on Heritage.”
Nonetheless, the group stated will continue with the phased reduction of its 66% holding in Old Mutual Asset Managers in an orderly way while underpinning the development of its tactic. It also mentioned it is going to pare Old Mutual’s holding company debt through asset disposals and with the help of surplus cash.
In addition to that, after the formation of the new South African holding company is complete, Old Mutual’s next step is distribution of a considerable proportion of the group’s shareholding in Nedbank to the shareholders of the new South African holding.
“The managed separation is highly complex and subject to ongoing discussions with key stakeholders, as well as legal and financial advisers.”
However, the group also claimed that the plans might undergo changes, especially if buyers approach Old Mutual.
“The plans are subject to change as a result of factors such as stakeholder consent, regulatory conditions and/or the readiness of the underlying businesses.
“Equally, Old Mutual may receive approaches for some or all of its businesses. There can be no certainty as to the nature of the final outcome.”
A range of firms showed interest in acquiring Old Mutual Wealth, but no buyer has made a public offer so far.