Selling UK brokerage makes sense for Old Mutual.

Posted On Tuesday, 15 October 2002 11:08 Published by
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At first glance it's not clear why Old Mutual would want to sell GNI, its successful UK derivatives brokerage.
At first glance it's not clear why Old Mutual would want to sell GNI, its successful UK derivatives brokerage.

The group's flagship UK private client operation, Gerrard, has been struggling because of its dependence on equity markets and internal troubles.

So GNI has been the business making the money; in the first half of this year its profit was £5m, whereas Gerrard managed a profit of only £3m after posting a loss in the second half of last year.

However, Old Mutual has long said that GNI which came as part of the package when Gerrard was acquired in 1999 is not core to its business, which is focused internationally on asset management and life assurance.

So it is no doubt open to a good offer, and the speculated amount of £100m is about 10 times GNI's expected earnings for this year. This is probably a good time to sell, too with hedge funds in vogue as equity markets tank, derivatives are hot property.

The question now is what Old Mutual will do with the money if it sells. There have been mutterings about a further acquisition in the UK, probably in asset management, but the group has not been too clear on this.

Investors, who watched as Mutual bought Gerrard for a whack and then had to write off a big chunk of the investment, will need some reassuring if the money is to be spent on another acquisition in the UK.

Cape Editor Dave Marrs edits The Bottom Line. E-mail to: This email address is being protected from spambots. You need JavaScript enabled to view it.

Business Day


Publisher: Business Day
Source: Business Day

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