LOGIN

March 9, 2004

By Ann Crotty

Johannesburg - Following the announcement by Rand Merchant Bank (RMB) that it did not regard the R17.50 a share offer to Mutual & Federal (M&F) minorities to be fair and reasonable, Old Mutual South Africa (OMSA) will have to increase its offer if it wants to acquire RMB's 12 percent holding in M&F.

The M&F board employed RMB to evaluate the offer.

In terms of OMSA's original offer, announced on January 20, the London-based insurance giant is obliged to post a document to minority shareholders providing them with the details of the follow-on offer.

In its January announcement, OMSA said the follow-on offer would be at the same price as the R17.50 a share offered in terms of the scheme that has been rejected by the M&F board following RMB's decision.

Given the minority shareholders' vocal opposition to the offer and the fact that M&F's share price has traded above that level since the offer was first announced, it seems inevitable that the necessary number of minorities will not accept the existing offer.

In its announcement yesterday, M&F said the terms and conditions of the offer were not fair and reasonable to shareholders. The M&F board had accordingly decided not to recommend the offer to its shareholders.

In terms of the Companies Act, the scheme of arrangement OMSA had initially proposed required the support of the M&F board, as it is the only party able to ask a court to convene the necessary shareholders' meeting to vote on the proposal. 

Without this support OMSA is obliged to pursue an offer in terms of Section 440k of the Companies Act. This requires the support of 90 percent of the minority shareholders, as opposed to the less onerous 75 percent needed in terms of a scheme.

Given that Royal Sun Alliance, which holds 74.9 percent of the minority shares, has given an irrevocable commitment to support the offer, a shareholders' meeting to vote on a scheme of arrangement would have secured sufficient votes in favour of OMSA's offer.

The independent stance taken by the M&F board ensures that minority shareholders will receive a better offer or M&F will remain listed.

OMSA can raise its offer in terms of the Securities Regulation Code.

Securities Regulation Panel executive director Richard Connellan indicated yesterday that he was keen to see a speedy response from OMSA, as the 30 days in which offer documents were supposed to be posted to shareholders had long expired.

Old Mutual shares were 13c lower in Johannesburg yesterday at R11.92 and M&F shares unchanged at R19.25.