Royal Bafokeng's planned acquisition of a controlling stake in Mutual & Federal for R8billion has been derailed.
Negotiations, which would have seen Royal Bafokeng Holdings (RBH) buying Old Mutual's 77percent stake in insurer Mutual & Federal, were terminated yesterday after Old Mutual and RBH failed to agree on a price.
Mpueleng Pooe, RBH's public affairs executive, said: "We could not reach an agreement on the price. We had a view on what we wanted to pay, and they had a different view.
"It was difficult for us to cancel negotiations since we were looking for more exposure to financial services away from a portfolio that is dominated by resources."
Old Mutual said in a statement released to the JSE yesterday it could not reach mutually acceptable terms with RBH in the current economic environment.
The deal has been in the pipeline for 12 months since Old Mutual expressed a desire to offload its interest in Mutual & Federal, which it said was a non-core business.
RBH, the investment firm of South Africa's Royal Bafokeng Nation, intended to purchase more than 70percent of Mutual & Federal's 292 million shares.
Khaya Gobodo, a director at Renaissance Asset Managers, said: "When negotiations opened Mutual & Federal's share price was sitting at around R30 a share and now it is all the way down to around R21.
"These declines have been felt in the entire banking and insurance industry. The price fell by 30percent shortly after negotiations began."
Chris Naidoo, an analyst at Metropolitan Asset Managers, said: "I think Old Mutual was quite happy to accept R25 a share, but that's just speculation."
Naidoo added that RBH might also have been expecting a further downturn in the market, but that Mutual & Federal was a sound business with good margins. He said Old Mutual would still be looking for potential buyers, though none have been named so far.
Jim Sutcliffe, Old Mutual Group chief executive, said: "
"Our strategy is to focus on our core asset management activities. Meanwhile, we will only consider transactions that fully reflect value for our shareholders."
RBH has grown its investment portfolio by buying into resources and the services industry. It has only one investment in financial services, a 10percent stake in Zurich Financial Services.