SOUTH AFRICA, Nov. 13, 2001 (PRIMEZONE) -- Nedcor Ltd. and Old Mutual(LSE:OML) (South Africa) Ltd. today announced the proposed merger of Permanent Bank and Old Mutual Bank to form a new banking operation focused on wealth management and financial planning.
The merged operation will be a custom-built bank-assurance institution focused on the retail middle market in South Africa. Nedcor and Old Mutual will each own 50 percent of the new bank.
The new bank, operating as Old Mutual Banking Services, will initially offer a full-range of deposit and investment accounts, home loans, secured loans and other wealth management products. Delivery channels for the new bank will be branches, ATMs, financial advisers, the telephone and the Internet.
Nedcor Chief Executive Richard Laubscher said: "This merger will strengthen Nedcor's position in the broader retail middle market. Harnessing the powerful Old Mutual brand to access this market, and the Old Mutual client base, offers exciting growth opportunities for Nedcor. The business will also benefit from the sales efforts of Old Mutual's extensive adviser and broker force. The merger rationalization benefits will provide impetus to Nedcor's ongoing efforts to drive further cost efficiencies and reductions."
Laubscher said that when Permanent Bank's middle market position, infrastructure and systems are added to the pre-eminent position of Old Mutual, the combination significantly outweighs the stand-alone case for Permanent Bank and Old Mutual Banking Services.
Old Mutual South Africa Managing Director Roddy Sparks said: "This development represents a major step forward in the Group's bank-assurance strategy, releasing considerable synergies for both businesses.
"By combining Old Mutual's brand, client base and advisory capability with Nedcor's processing expertise and Permanent Bank's branch network, we will create a compelling proposition for a large number of South African consumers."
The two groups have existing bank-assurance initiatives with substantial growth potential. The growth experience to date provides further motivation for the creation of the new bank in the important middle market.
The merger will provide Old Mutual Banking Services' clients with greater reach and functionality through Permanent Bank's branch and ATM network. Permanent Bank clients will benefit from a wider range of products; more choice in delivery channels; advice-assisted financial planning; and the backing of two of South Africa's most solid financial institutions.
The transaction will be undertaken for no cash consideration from either side. This has been achieved by balancing the relative contributions from both parties. The merged business will have an initial asset base of about R5 billion.
Nedcor Executive Director Derek Muller explained the merger in the context of Nedcor's retail growth strategy. "A pivotal part of Nedcor's retail strategy in the middle market is alliance partnerships with best-of-breed consumer groups such as Pick 'n Pay, JD Group, Imperial Bank and now Old Mutual with its strong brand and client base of over three million. The new distribution channels and client bases acquired through our alliances broaden our product range and increase the volume of transactions through the existing bank infrastructure resulting in progressively lower unit costs."
Eugene Smith, Old Mutual Banking Services Chief Executive said the merger represented the next step in the development of OMBS. "The merger is a revenue-growth proposition that exploits synergies inherent in the brand, processes, distribution channels and client bases. Clients will enjoy an enhanced and integrated financial services offering, which is fully consistent with Old Mutual's bank-assurance strategy."
The process of integrating Permanent Bank and Old Mutual Banking Services is expected to take between six and 12 months from the date of approval of the proposed transaction.
During this period, the Permanent Bank brand will run in parallel with the Old Mutual Banking Services brand. The integration process and the resulting availability of a wider range of delivery channels for clients will see a restructuring of the existing Permanent Bank branch network. This will involve relocation or closure of some branches. Every effort will be made to re-deploy affected staff members to other areas of the group. Accordingly, the final impact on staff is not expected to be significant.
Permanent Bank has a long and proud history of involvement in home loans and investments. Muller said existing clients can be reassured of the continued dedication to servicing their current and future needs.
Old Mutual is South Africa's leading financial services company, offering personal financial advice and planning to more than three million clients. Old Mutual Banking Services was launched to broaden the Group's range of wealth accumulation and protection products. It will offer short-term savings and investments as well as home loans and other asset-backed lending.
The nominated executive chairman of the new bank is Jack de Blanche, an Executive Director of Nedcor Bank.
The nominated Chief Executive is Eugene Smith, the current Chief Executive of Old Mutual Banking Services.
Old Mutual and Nedcor will have equal representation on the board, which will comprise executive and non-executive directors.
The transaction is subject to regulatory approvals, including the Registrar of Banks. It is also subject to the normal due diligence process. As this is a transaction between related parties, an independent investment bank has been requested to provide "fair and reasonable" opinion for the independent, Non-Executive Directors of Nedcor.