Old Mutual spells out share deal

April 9, 2010
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, NAIROBI, Kenya, Apr 9 – Minority shareholders of  Old Mutual Life Assurance Company (OMLAC) are free to either buy or sell their shares to Tidanga Limited as they wish, the company has said.

Old Mutual Kenya Chief Executive Officer (CEO) Tavaziva Madzinga said that although the minority shareholders have no pre-emptive rights, the proposed offer is not compulsory but an opportunity for them to participate in the recapitalisation process of the company.

“It is important to note that the allocation of shares is at the full discretion of the board. However, the offer seeks to give minorities a fair chance to participate in the recapitalisation of OMLAC effectively putting them back in the same position as before Tidanga in terms of the shares they own thereby negating any dilution,” said Mr Madzinga.

Old Mutual has of late been in the limelight since the entry of Tidanga Ltd which came on board towards the end of last year as the life insurance firm sought to raise its paid-up capital to meet new statutory requirements.

As part of the arrangement with OMLAC, Tidanga which owns 11.11 million shares valued at Sh10 each, was to offload part of the shares it had acquired to other shareholders or buy shares from minority shareholders who wanted to exit.

This move has however been opposed by the shareholders with few shares who argue that the Sh30 they are being offered is below the value of their shares.

 The CEO however said that since OMLAC is not a listed firm, minority shareholders can therefore accept to ‘purchase extra shares, sell their shares or do nothing and retain their existing holding’ as the offer is optional.

“The issue of shares and injection of capital would alter the share value price hence the offer of Sh30 per share,” said Mr Madzinga.

According to Mr Madzinga, the valuation of a life company is not simply based on Net Asset Value (NAV) but is a combination of NAV plus and future profitability of in force business captured by the Embedded Value (EV).

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