Old Mutual to distribute R10.4 billion in Nedbank shares to its investors

This will reduce Old Mutual’s stake in the bank to 7.2 percent from 19.4 percent.

Insurance giant Old Mutual has announced that it will issue $734 million (R10.4 billion) in shares in moneylender Nedbank among its shareholders, reducing its stake in the bank to 7.2 percent from 19.4 percent.

Old Mutual previously held a more than 50 percent stake in Nedbank, which is one of South Africa’s big four banks, but in 2018 decided to sell most of its stake in the bank to simplify its conglomerate structure.

While keeping a minority position in the bank made sense at the time, the Old Mutual board decided that it was now in the best interests of shareholders to distribute the shares. This simplifies the Old Mutual group and provides a substantial return of capital to shareholders.

Based on Nedbank's closing share price of R167.67, the 62.13 million Nedbank shares are valued at roughly R10.4 billion, or around 12.2 percent of the bank’s issued share capital. Investors will receive little under 1.32 Nedbank shares for every 100 Old Mutual shares they own, according to the insurer.

Nedbank believes that the move will increase its size of shares freely tradeable on the stock market.

“Any existing commercial relationships with Old Mutual will continue to be underpinned by arms-length commercial agreements,” Nedbank said in a statement.