Corporate Governance in Modern Financial Capitalism
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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.
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Chapter 8: Working for a Stand-alone Case or Heading for a Structural Deal?

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


INTERNAL PROBLEMS In late April 2004, Skandia had a market capitalization of 30 billion SEK (equivalent to 30 SEK per share). According to the embedded-value model, this valuation reflected a slight premium compared to the consolidated capital. Financial analysts, who decided to include the present value of future cash flow of projected new sales in the valuation, arrived instead at 40 billion SEK. The business weekly Affärsvärlden1 claimed that ‘no one’ would want to pay that much for Skandia. The risk built into the Skandia business model, largely in the hands of independent financial advisers (IFAs), was deemed too high. However, the risk of a downturn was argued to be lower than previously. During the first quarter of 2004, Skandia’s sales of unit-linked assurance and mutual funds increased to 25 billion SEK, which corresponded to a rise of almost 50 per cent in local currency compared to the previous year. By that time, Skandia’s cash flow was more or less in balance. Affärsvärlden also wrote that CEO Andersson had to successfully manage a Skandia turnaround and, if he did not deliver the expected results, the board – led by Chair Magnusson – would probably sell (parts of) Skandia. The growth in the world economy and the improvement of Skandia figures did not, however, hide the fact that the Skandia group was unbalanced; it was structured into three groups: the Nordic region; Skandia Life UK including the offshore subsidiary Royal Skandia; and continental Europe, along with countries in Latin...

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