Skandia rejects £3.1bn offer, but Old Mutual may go hostile

Old Mutual, the Anglo-South African financial services group, insisted last night its hopes of buying Skandia remained alive, despite the Scandinavian insurer knocking back a £3.1bn cash and shares offer.

Old Mutual said it had made an informal bid comprising 40 per cent cash and 60 per cent shares, but had failed to secure the Skandia board's recommendation.

But it said its offer, worth 42 Swedish kroner (£3.06) per Skandia share, had won the backing of several of the company's major shareholders and it did not rule out the possibility of making a hostile bid if it failed to secure the board's approval. It is believed the Skandia board is split over whether to accept the proposal.

Old Mutual, whose chief executive is Jim Sutcliffe, said it remained keen to secure the board's approval, and was making changes to its offer. The informal bid was pitched at a premium of more than 18 per cent to the level at which Skandia's shares were trading before news of the talks emerged three months ago.

Old Mutual was forced to make a public statement yesterday after reports in the Swedish press over the weekend. Reports that talks were on the verge of collapse sent the shares of both companies down in early trading yesterday. The group said: "Old Mutual confirms it has held discussions with Skandia and a number of Skandia's major shareholders during the course of the past week concerning a possible offer at a price of approximately Skr42 per share and believes after discussions with these large shareholders, a majority of them would welcome such a proposal.

"Old Mutual is keen to secure a recommendation from the board of Skandia and is considering selected modifications to the proposal to address issues raised by the board. A further announcement will be made as soon as possible."

Skandia issued a curt statement, confirming it was still in talks and saying that when a formal offer was made, it would be evaluated.

In Stockholm, Skandia shares recovered to close up slightly at Skr41.3, while Old Mutual shares finished up 0.6 per cent in Johannesburg. Old Mutual shares did not trade in London because of the bank holiday yesterday.

Old Mutual has been on the hunt for a major European acquisition for the past five years, but in spite of participating in several high-profile auctions, it has yet to succeed. Skandia's attraction is its major foothold in the UK long-term savings market, where it is one of the largest players. Although Old Mutual is believed to have been interested only in the UK business, Skandia's board wants to sell the company as a whole.

Previously, Old Mutual had attempted to take on the role of consolidator in the UK closed life book business, but ended up losing out to the likes of Resolution Life, Britannic and Hugh Osmond at the major auctions of the past year. It has since conceded it is no longer interested in the closed life book market.

Before 2004, the company had said it was interested in buying a UK asset manager to add to the boutique outfit OMAM which it owns. If it is unsuccessful in its bid for Skandia, the group is likely to continue pursuing opportunities in this market.

Skandia has been embroiled in a string of scandals over the past year, including accusations that it has overpaid its senior management. It was also caught up in the market-timing investigation in the US, eventually settling with US regulators for $95m (£53m) in June.