Investment firm gears up for Old Mutual stake

A locally incorporated company is preparing a bid to buy out small shareholders through the purchase of minority held shares in Old Mutual Life Assurance Company (OMLAC).

The move by Tidanga Limited which owns 20 per cent of the insurance firm — a subsidiary of Old Mutual Plc — is seen as way of creating liquidity for the insurance firm while giving minority and disgruntled shareholders an exit avenue.

Coming at time when OMLAC is seeking a new lease of life after years declining earnings, dry dividend taps and stormy annual general meetings — Tidanga’s bid to buy out an estimated Sh77.8 million worth of shares held by minority shareholders will inject funds to rev up the firm’s earnings.

“This is aimed at creating liquidity for the firm and to also allows minority shareholders to take up their rights or sell their shares,” says Tavaziva Madzinga, Old Mutual Group’s chief executive officer.

In the current offer, Tidanga is giving minority shareholders the option to sell all of their shares in the insurer to the firm upon the terms and conditions set out in an offer letter sent out last week.

Another option on the table is for minority shareholders to buy from Tidanga up to a further 2 shares for every existing share they hold in OMLAC.

Old Mutual Plc owns 66 per cent of the insurer while minority shareholders control a 14 per cent stake in the firm.

Tidanga owns about 11.1 million ordinary shares valued at Sh10 each in the firm’s share capital.

While it remains unclear who owns Tidanga, the firm’s formation came about as a statutory requirement to have a local shareholders own at least a third of the shareholding in any insurance company operating in Kenya.

With no pre-emptive rights of their own, minority shareholders will either have to take up the rights on offer or sell them to Tidanga.

According to Mr Madzinga, OMLAC’s minority shareholders — a number of whom came on board during Old Mutual’s demutualisation back in 1999 — number about 1500 with the highest share holding held by one investor currently standing at 0.4 per cent.

“A lot of shareholders got shares during the demutualisation process and this is an opportunity for them to sell,” says Mr. Madzinga.

With an estimated Sh84 billion under management, Old Mutual Kenya will be hoping that the fresh cash and an airtight strategy will stem losses in its life business while spurring tidy returns in the investments and fund management side of its business.

Old Mutual Kenya’s life business registered lower than expected income in 2008 strained by what the firm had attributed to the introduction of new business lines.