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Corporate Governance in Modern Financial Capitalism

Corporate Governance in Modern Financial Capitalism

Old Mutual’s Hostile Takeover of Skandia

Markus Kallifatides, Sophie Nachemson-Ekwall and Sven-Erik Sjöstrand

This insightful book focuses upon corporate governance processes, and explores the conditions required for effective corporate governance and control in 21st century globalized and financialized economies. In presenting a comprehensive study of a cross-border hostile corporate take-over process, describing the actors, institutions and events involved, this book examines and questions the current forms of corporate governance and control – both from a national and a global perspective. Using Old Mutual’s takeover of Skandia as a case study, the authors address corporate governance theory, and highlight its two fundamental dimensions: financial and operational flows.

Chapter 19: Hedge Funds Intervene

Markus Kallifatides, Sophie Nachemson-Ekwall and Sven-Erik Sjöstrand

Subjects: business and management, corporate governance, strategic management, economics and finance, corporate governance, financial economics and regulation, law - academic, corporate law and governance


PAULSON & CO. TAKES A STRONG POSITION IN SKANDIA Old Mutual’s CEO Jim Sutcliffe and CFO Julian Roberts returned to London following the bid presentation on 2 September in Stockholm. A week later, Old Mutual hosted a lunch for institutional investors. The room was crowded and many investors, unknown to the company, showed up. Most participants were young men from the UK and American hedge fund industry. In fact, there were more than 50 of them. Several of them returned, called and traded heavily in the Old Mutual and Skandia stocks during the following weeks. In the autumn of 2005 Paulson & Co.1 was one of the hedge funds that eyed Skandia, at that time controlling approximately $4.2 billion in assets. The company had been involved in one other European deal, namely Swedish Hexagon’s2 bid for Swiss Leica3 in spring 2005. Paulson & Co. took a large position in Leica Geosystems and successfully blocked Hexagon from gaining control. In the end, Paulson & Co. forced Hexagon to raise its bid. Founder John Paulson and Manager, Paolo Pellegrini were familiar with the activities of Cevian and Christer Gardell. They had actually also met him during one of his visits to New York (in late autumn 2004). A year later, Paulson evidently shared Gardell’s view that a combined Old Mutual–Skandia would allow the two firms to compete more effectively on a global scale. They both thought Skandia was too small by itself and Old Mutual, although larger, would benefit from a geographical spread beyond its...

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