Foolish Special

[ June 20, 2000 ]

The Battle for Standard Life

By Stuart Watson (TMFTiger)

Tuesday June 27 will see the crucial vote in the battle over whether Standard Life should demutualise. It is a topic that has generated some fiery debate over the past few months. The Standard Life Members' Action Group is seeking to force the board's hand, and dangling the promise of large windfalls. Naturally, Standard Life believes many members' windfalls won't be that significant and is urging its members not to throw away its future.

One thing that is not in doubt is that, should the demutualisation proceed, Standard Life will be one of the largest companies to come to the market in recent years. The estimated price tag of around £12b to £15b would be about the same as the Halifax (LSE: HFX) when the former building society floated back in 1997. The top end of the range would make Standard Life the twentieth largest company in the UK by market value. Standard Life has 2.3m policyholders who would enjoy an average windfall of around £6,000.

The situation at Standard Life is rather different from other recent demutualisations. Not only is Standard Life large enough to compete against its listed competitors it has also been at the forefront of developing innovative new products via Standard Life Bank. Perhaps its most significant move was the launch of Futureperfect, a 25 year capped mortgage at just 6.25%. Conveniently this product was thrust into the public eye just a couple of weeks before the vote was due to take place.

One Fool's View

So what is the Foolish viewpoint on all this? Rob Davies (TMFEssex), who calls himself a committed carpetbagger, has written three articles about Standard Life recently. First of all he took a look at the defence document sent out by Standard Life. Like the defence documents published in takeover battles, this one did seem to paint just one side of the picture.

Rob also interviewed Fred Woolard, the man behind the Standard Life Members' Action Group. He talks here about where the £12b to £15b price tag comes from and why the board of Standard Life seems to want to have their cake as well as eat it.

Finally, we also take a look at the economic reasons for mutuality. Why should companies like Standard Life head for the market when others such as Kelda (LSE: KEL), the old Yorkshire Water, are heading in the opposite direction.

The Community's View

Our Standard Life discussion board has seen some lively debate since we opened it in mid-May. Fools such as King McKong, who lives in Standard Life's hometown of Edinburgh, believes the business should retain its mutual status. He is supported by Harryhoudini who cites the experience of members of the Bradford & Bingley, due to list itself later this year. But others disagree. Johnw11 started off undecided but found that the barrage of one-sided information from Standard Life did not have the quite the effect they envisaged. Overall it seems like the "cash now" option is attractive as ever. In this poll over three-quarters of Fools said that they were in favour of demutualisation. If you haven't voted yet you can do so now via this link.

And finally, if you are a member of Standard Life don't forget that your voting form or proxy has to be with them before Friday 23 June.

Related Links

• Standard Life website | discussion board
• Standard Life Members' Action Group