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 11: Growing Unease on the Skandia Board

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


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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