Old Mutual’s Hostile Takeover of Skandia
Chapter 11: Growing Unease on the Skandia Board
THE SKANDIA BOARD MEETING ON 22 DECEMBER 2004 The Skandia share had been trading at around 28–29 SEK until 13 December, when activist Christer Gardell announced his Cevian fund investment. Before Christmas the share price then increased about 10 per cent, reaching 31.5 SEK. The general view among the board members was that Skandia was still trading at a discount. The low share price was attributed to several ongoing litigations, certain tax issues and uncertainties related to the embedded-value calculations. The Skandia board held its last meeting for the season on 22 December 2004. For the first time since the 12 August meeting, advisers from Morgan Stanley were present. They were invited by Chair Bernt Magnusson to give an update on Skandia’s business opportunities and lay a foundation for discussions about the future for Skandia Life UK. Morgan Stanley representatives mentioned a possible value of 41 SEK billion for the whole Skandia group. This was a sort of ‘indicative group appraisal value’, where the different divisions were valued separately. The adviser further talked about something they called ‘Skandia’s credibility gap’, which, based on applying multiples similar to those applied to industry peers, referred to the difference between the share price and company valuations. The advisers also described two ways to close the gap. The ‘Glue document’, a report that McKinsey consultants had produced back in May 2004, described the first. It indicated cost synergies in the range of 600–800 million SEK. However, according to Morgan Stanley’s presentation, there...
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