How to get a slice of the windfall action

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The Independent Online
Within the next 24 hours, millions of Nationwide Building Society members will discover whether they are on course to receive an average of pounds 2,000 in free shares - or if their society's defence of mutuality will lead to them benefiting in a more subdued but longer-term manner.

Votes in the elections for the Nationwide board have been counted and may be announced today. The ballot is make-or-break for proponents of the conversion strategy, which would see the society seeking a stock-market flotation.

Five candidates to the board, led by Michael Hardern, a part-time butler, favour immediate flotation. If they triumph over the board's own candidates, the Nationwide will have no choice but to obey its members' democratic mandate.

Unexpectedly, the campaign has attracted considerable interest from members, more than one million of whom - a third of the potential electorate - have voted.

Nationwide argues that the benefits of mutuality are such that over a decade or so, a joint mortgage borrower and saver can easily receive more in better rates from the society than they might receive in free shares. By competing with the banks in this way, the society adds, it ensures that millions of people receive a better deal.

Mr Hardern and his friends reply that free shares will more than compensate those who vote to abandon mutual status.

Although the battle for the soul of Nationwide has already been decided one way or another, that of other societies has not.

The Nationwide vote will give a good indication of the mood of members in other, smaller societies. They have watched as Halifax, Alliance & Leicester, Woolwich and Northern Rock members enjoy share windfalls and may want a slice of the action.

If so, even the most diehard supporter of mutuality must conclude that while a few rearguard battles are still to be fought, the main war has been lost.

That means investors should begin to target societies which will in all likelihood "crystallise" their value. This may be done in a variety of ways: the most obvious, that of flotation, is unlikely to extend to many more societies, which are too small to seek a stock-market listing.Then there is the potential takeover of many smaller societies. Many would make tempting targets for predators. Lastly, there is the potential for intra-society mergers.

For those who have already opened accounts with such societies, there is the more difficult question of mutually owned insurance companies and their long-term prospects. But that's the subject of another piece in these pages

Nic Cicutti

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