Old Mutual, the FTSE 100 savings and investment group is to sell its Nordic business Skandia AB for £2.1bn in an effort to "reduce complexity" and pay down debt.
The deal, which still needs regulatory and shareholder approval, is expected to complete during the first quarter of 2012.
The £2.1bn (22.5bn Swedish Krona) is payable in cash and is not expected to attract any tax obligations.
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The net asset value of Skandia as at June 30 was £1.7bn and it returned an operating profit of £60m in the last half-year.
The other party in the deal, Skandia Liv is a complicated beast.
It is a traditional life assurance company serving customers in Sweden and Denmark. It is also a wholly-owned subsidiary of Old Mutual but operates within a strict legal framework which prevents it from distributing profits to its owner.
As Old Mutual admits it "lacks the financial benefits which would usually be associated with control of a subsidiary."
The idea is for Skandia Liv to use the leading position that Skandia AB enjoys in its home markets to create a Scandanavian champion. Its current businesses include insurance, banking and health care.
Old Mutual, however, will retain ownership of the Skandia brand in markets outside of Sweden, Denmark and Norway.
Commenting on the transaction, Julian Roberts, Group Chief Executive of Old Mutual, said:
"The creation of a strong and efficient Nordic champion represents a valuable opportunity for Old Mutual's shareholders and Skandia Liv's policyholders."
He added:
"This Transaction represents a material step in the execution of our restructuring programme. We intend to use the proceeds from the sale to accelerate the reduction in group borrowings and to return surplus capital arising from the Transaction to shareholders."
Old Mutual is down 10% this year, over the last five years the firm's share price has dropped 33%.
BS
