South Africa's Old Mutual to float at pounds 4bn

OLD MUTUAL, South Africa's biggest insurer, said yesterday that it will offer its shares at 120 pence or 11.25 rand, when it floats on the London and Johannesburg stock exchanges today.

The share offer will raise pounds 1.4bn and values Old Mutual at just under pounds 4bn. Analysts expect the shares to go at least a 10 per cent plus premium today.

The float is seen both as a continuation of the trend for big South African companies like Anglo American and South African Breweries to float in London, and as a further step in black empowerment.

The demutualisation is "the biggest black empowerment exercise ever in Africa," Old Mutual's chairman Mike Levett says. Just under 1.2 million of the company's 3.2 million policyholders have elected to sell their 300 free shares.

The price is within the 112-142 pence range, equivalent to 10-14 rand, that Old Mutual earlier estimated that it would offer its shares at. The insurer is offering around 1.7 billion shares, or about 36 per cent of its share capital. It is also issuing new shares to raise up to pounds 377m to help it reduce its debt.

Old Mutual, which had total assets of pounds 32bn at 31 December 1998, ditched its mutual status earlier this year. The company, South Africa's biggest financial services company, will rank in the top 10 by market value on the Johannesburg bourse. It is set to secure a place in the blue-chip FTSE 100 index in September.

"This was the biggest issue ever by a South African company and there was big interest from blue chip institutions," said a spokesman for Old Mutual.

Philip Haggard, an analyst at Fox-Pitt Kelton, said at the weekend: "Demand from institutional investors has finished strongly on the circuit of road- shows ... The book building process had a slow start initially, but it has accelerated this week. I'm estimating that the sale will be three to four times subscribed by Monday.''

Stock market week, page 19