JOHANNESBURG – South Africa’s oldest insurance company Old Mutual will today respond to the contempt of court application by under-fire chief executive Peter Moyo as investors count the costs of the damage caused by the continuing spat between the parties.
Moyo last week sued Old Mutual and its directors for R250 million after the group refused to let him resume his duties, despite the South Gauteng High Court ruling that he should be reinstated.
Old Mutual spokesperson Tabby Tsengiwe confirmed that the insurer would file papers at the South Gauteng High Court.
“Old Mutual was provided with 10 days within which to respond and will, accordingly, submit this response tomorrow, adhering to the timelines provided by the judge in this matter,” Tsengiwe said yesterday.
Old Mutual axed Moyo twice in June and August, charging that it had become clear that a continued employment relationship with Moyo was untenable.
Moyo’s lawyer Eric Mabuza said yesterday that he was awaiting the insurer to file its response to Moyo’s contempt of court application.
“We are waiting with bated breath to hear how they (Old Mutual) will justify its conduct,” Mabuza said.
The 174-year-old insurer has wiped R6.8 billion off its market cap since May when it cited a material breakdown in confidence and trust for its termination of Moyo’s contract.
It blamed Moyo for chairing a meeting of the NMT Capital board at which it was decided to pay an ordinary dividend of R105m, while omitting to pay a R65.5m preference share dividend due to Old Mutual which holds a 20 percent stake in NMT.
Analysts said the five-month impassé would have little impact on the company as news reports emerged that the insurer's shareholders were split on whether it should settle with Moyo or run the risk of the damages claim.
Ron Kiplin, an investment analyst at Cratos Capital, said the market had not been impressed with the high level of litigious reports emanating from the relevant parties.
“This has caused a great deal of uncertainty, as to how the current impasse can be resolved, in an amicable manner. In turn, the market perception is that there will be reputable damage incurred by Old Mutual Limited,” Klipin said.
Klipin said the litigation had resulted in a major decline in the share price in the order of 20 percent.
“The business has a strong following and a robust business model, which should not be impacted on, once the impasse has been resolved,” said Klipin.
On Monday reports emerged that Old Mutual’s biggest shareholders were divided on how to proceed with the debacle.
Allan Gray, the second-biggest investor, expressed opposition to a settlement, while Sanlam Investment Management said it wanted to wait and see the court processes through.
Prudential Investment Managers reckoned a payout of that magnitude would be “egregious.”
Richard Hasson, an investment analyst at Cape Town based Electus Fund Managers said:
“I do not believe that the Peter Moyo saga materially impacts the long-term valuation of Old Mutual, so we would see any material share price weakness on the back of this as a long term buying opportunity.”