Old Mutual increases its stake in UAP
Old Mutual plc
Ref 34/15
26 January 2015
Old Mutual increases its stake in uap
Following the announcement on 9 January 2015 that Old Mutual plc ("Old Mutual" or "the Group") had acquired 23.3% of UAP Holdings Limited ("UAP"), the Group today agreed to purchase a further 37.3% of UAP's existing share capital, thereby increasing its stake to 60.7%, subject to various regulatory approvals.
Old Mutual has notified the Capital Markets Authority ("CMA") in Kenya of the offer it has made to and the acceptance from The Abraaj Group, AfricInvest and Swedfund, who collectively hold 37.3% of the shares in UAP. The notice includes an application to the CMA for an exemption from having to make a mandatory offer to all UAP shareholders under the CMA Regulations.
The consideration of KES 14.2 billion (approximately USD155.5 million) for the additional 37.3% stake will be paid in cash and will be funded from existing Group resources. The transaction is expected to complete during 2015.
Rationale for the transaction
Old Mutual has identified East Africa as a key region within sub-Saharan Africa in which we need scale. East Africa has strong economic growth, attractive demographics, improving infrastructure and a nascent and under-penetrated financial services industry.
The majority stake we have secured in UAP, combined with the existing Old Mutual businesses in Kenya, will provide the Group with the scale and product breadth to capitalise on the significant growth expected in the region. In Kenya, the largest and most advanced East African market, insurance penetration remains very low, at 3.16% of GDP, but with gross written premiums predicted to grow at a compound annual growth rate of 18% through to 2020.
UAP has a strong position in East and Central Africa and a product offering that is highly complementary to our existing businesses.
In Kenya, UAP has the third largest Property & Casualty ("P&C") market share; the second largest health insurance business; a substantial property investment portfolio and a fast growing life insurance business. It has established and diverse distribution networks including via brokers; an agency force; direct sales; bancassurance; digital; and supermarkets.
In Uganda, it has the second largest P&C and health insurance businesses, and the third largest life business. It also has P&C businesses in Rwanda, Tanzania and South Sudan, and a brokerage business in the Democratic Republic of Congo. It has more than 650,000 customers and in 2013 made KES 2.2 billion of operating profit before tax, gross written premiums of KES 12.7 billion and had a net book value of KES 13.9 billion.
Julian Roberts, Group Chief Executive of Old Mutual plc, said: "We are delighted to have secured a majority stake in UAP. East Africa is a core growth market for Old Mutual and this transaction is a critical step in Old Mutual becoming an African financial services champion and further progress on our strategic agenda to transform the Group and improve its sustainable growth profile."
Ralph Mupita, Chief Executive of Old Mutual Emerging Markets, said: "Following the conclusion of this transaction, we will have invested nearly USD300 million in the region since 2012. Combining Old Mutual and the UAP businesses will provide us with the capability and scale to offer fully integrated financial services including life, healthcare, P&C and banking products."
Dr Joseph Wanjui, Chairman of UAP, said: "This is an exciting development for our business and for our clients. The combined strengths of Old Mutual and UAP will give our customers unrivalled access to a full suite of financial services.
"Our partnership with Old Mutual is aligned with our vision of creating a revolutionary African financial services company that delivers what customers want and where they need it."
Background to the transaction
Old Mutual Emerging Markets has allocated R5 billion ($500 million) to invest in financial services operations in sub-Saharan Africa. We deployed R700 million of this in buying Oceanic Life and Oceanic General Insurance in Nigeria during Q1 2013, Provident Life Assurance in Ghana during Q4 2013 and Faulu Microfinance Bank in Kenya in early 2014. In 2014, Nedbank, Old Mutual's banking subsidiary, exercised its rights to subscribe for a 20% shareholding in ETI for $494 million, creating the largest banking network in Africa, comprising more than 2,000 branches and offices in 39 countries. It has also invested $24.4 million in taking a 36.4% stake in Banco Unico in Mozambique.
Enquiries
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Notes to Editors
Old Mutual provides investment, savings, insurance and banking services to more than 16 million customers in Africa, the Americas, Asia and Europe. Originating in South Africa in 1845, Old Mutual has been listed on the London and Johannesburg Stock Exchanges, among others, since 1999.
In the year ended 31 December 2013, the Group reported adjusted operating profit before tax of £1.6 billion (on an IFRS basis) and had £294 billion of funds under management from core operations.
For further information on Old Mutual plc, please visit the corporate website at www.oldmutual.com
For further information on UAP, please visit the corporate website at www.uap-group.com
This information is provided by RNS
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