Old Mutual’s (OML) UK wealth management business Quilter (QLT) has officially been demerged and listed as a separate company in London and South Africa. Its shares enjoy a good start to independent life, enjoying a 9.3% rally to 158.6p on the London market.
Under the spin-off, Old Mutual has sold 9.5% of the business and distributed the rest to shareholders with one Quilter share being distributed for every three in Old Mutual.
The latest issue of Shares explores how de-mergers can unlock hidden value for spin-offs and, in some cases, outperform their former parent on the stock market.
Investors were expecting a pricing range of between 125p and 155p for Quilter’s IPO.
The wealth business ended up being priced at 145p resulting in a market cap of £3bn when the subsequent post-listing share price rise has been factored in.
While Quilter is already off to a stellar start, AJ Bell investment director Russ Mould suggests it might not be in for an easy ride on the stock market.
Mould says a key issue is over half of Old Mutual’s shareholders are based in South Africa and they may not want exposure to the UK wealth management sector, which Quilter is not a market leader in.
‘Quilter is a very broad business, and while operating in a growth industry, it doesn’t really stand out as having any particular strength versus its peer group,’ comments Mould.
He highlights Quilter’s ongoing IT upgrade by FNZ could be an underappreciated risk, particularly since Aviva (AV.) and Barclays (BARC) have suffered issues with systems by FNZ on launch.
