Old Mutual may be based in the UK these days, but the company has its roots in South Africa. It was founded over 170 years ago in the (then) Cape Province, and although the Headquarters of the insurance, banking and investment group is now in London, the company still has a large presence in its home country; owning, amongst other things, a majority stake in Nedbank.

The Strategic Review

Most major companies have strategic reviews from time to time. It’s a chance for a company to take stock, as well as analysing whether the business would be better off moving in a different direction, whether in the form of a change of headquarter location, a boardroom shake-up, or a stock buyback. Often, however, any changes that result from these reviews are minor ones, but the rumours which are circling regarding this particular review from Old Mutual appear to have enough people believing in their veracity to have had a significant effect on the company’s share price.

To recap, on Sunday, Sky News broke a story where it claimed that the £9 billion company was planning a major break-up of its assets, separating its Nedbank stake, its asset-management business, its UK-centric wealth division and the SA-based emerging markets outfit. Sky continued by stating that various outfits have already expressed an interest in purchasing some of these stand-alone units, whilst hedging slightly by adding the caveat that the plan could (quite understandably) take quite a while to be completely mapped out.

Old Mutual’s Response

Old Mutual appeared to be playing it coy in their official response to the claims this morning, going with the fairly standard ‘considering all options’ line – but they notably took absolutely no step towards quashing the rumours, and the share price has risen accordingly. At the time of writing, Old Mutual’s share price was up by just over 7% on the FTSE 100, having been even higher earlier on at the market open.

For its part, Nedbank has announced that it is ‘engaging collaboratively’, as Reuters put it, with the strategic review, although would-be investors from outside of SA thinking that an investment in Nedbank at this point might reap potential rewards are advised to keep in mind that the rather wobbly Rand is also something which has the potential to make the value of Nedbank shares fluctuate.

This coming Friday may provide investors with some answers, with Old Mutual due to release its quarterly earnings on the 11th March. Will the company take this opportunity to inform both investors and the general market of their plans? We will have to wait and see.