What Sampo shareholders need to know about the demerger

The demerger process and listing of Mandatum on Nasdaq Helsinki continues as planned and the effective date of the demerger is set to be 1 October 2023.

In this blog entry, we address the most common questions shareholders might ask regarding the demerger.

What is the rationale for the separation of Mandatum from the rest of the Group?

By separating Mandatum, Sampo will become a pure-play P&C insurance group operating in the Nordic and UK digital personal lines markets. As a pure-play P&C insurer, Sampo expects to be able to enhance returns on capital with reduced market risk.

The separation of Mandatum will drive a reduction in Sampo’s exposure to market risk through a fall in the Group’s exposure to risk assets and with-profit insurance liabilities, supporting a reduction in the volatility of earnings and capital. With reduced exposure to market stress events, Sampo could be able to operate with lower financial buffers.

Building on its strong track record as an investment manager, an independently listed Mandatum will have the opportunity to grow by organically broadening its offering to new client groups, including outside Finland, or by consolidation in its home market. However, such growth would require commitments from Sampo that go beyond what the Board deems to be appropriate under the Group’s P&C insurance focused strategy.

What do I have to do to receive Mandatum shares?

The demerger will not require any action from Sampo shareholders. New Mandatum shares will be automatically transferred to Sampo shareholders book-entry accounts. 

How many Mandatum shares will I receive?

Shareholders will receive 1 Mandatum share for each Sampo share they hold. For example, if you hold 20 Sampo shares, you will receive 20 Mandatum shares.

What happens to my current Sampo shares?

Shareholdings in Sampo remain unchanged. 

Will receiving Mandatum shares cost me?

Sampo will not charge any costs to shareholders in the proposed partial demerger. Account operators and other intermediaries may charge fees for the maintenance of book-entry accounts and for custody of shares.

What will be the last day to buy Sampo shares if I want to receive Mandatum shares?

Last day to buy Sampo shares for a shareholder to be entitled to receive Mandatum shares as a demerger consideration is 29 September 2023.

What will be the first trading day for Sampo share without Mandatum?

The first trading day for Sampo share without Mandatum will be 2 October 2023.

When will Mandatum shares be registered in shareholders’ book-entry accounts?

Mandatum shares will be registered to shareholders book-entry accounts on 2 October 2023.

What will be the first trading day for Mandatum on Nasdaq Helsinki?

The first trading day for Mandatum share is estimated to be 2 October 2023.

What is Mandatum’s IPO price?

Mandatum will not raise any new capital and Sampo does not sell any Mandatum shares. Hence, there is no IPO price. The share price will be determined by normal trading on Nasdaq Helsinki. 

How will Sampo and Mandatum shares develop after the demerger?

The share price for both companies will be determined by normal trading on Nasdaq Helsinki and we do not the speculate on the performance. However, given that the value of Mandatum is separated from Sampo, it is possible that the share price of Sampo will go down on the first trading day without Mandatum (2 October 2023) the same way as shares tend to decline on ex-dividend days.

How will the received Mandatum shares be taxed?

The demerger will not cause immediate tax consequences for shareholders who are generally liable to tax in Finland, as the partial demerger will be treated as a tax neutral demerger for Finnish tax purposes. Capital gains taxes become payable when the shareholder sells the Mandatum shares received.

However, Sampo cannot give any detailed tax advice to shareholders, as the shareholders’ taxation depends, among other things, on shareholders’ domicile and legal status.

How will the acquisition cost of Sampo and Mandatum shares be determined for tax purposes following the demerger?

The acquisition cost of Sampo share will be split between Sampo and Mandatum. The split will be based in proportion to the net assets of the companies at the time of demerger. Alternatively, the split may be determined by the proportion of the fair values of the companies’ shares. The proportion of fair values will be used if the division ratio of net assets materially differs from the proportion of the fair values of the shares. In practice, a difference of 20 percentage points has been considered as material. 

According to the view of the Finnish Tax Administration, in a demerger the fair value of the shares in the receiving company and the partially demerged company is primarily considered to correspond the weighted average price of the shares on the first trading day or alternatively, the weighted average price on the first five trading days, if it is deemed to better represent the fair value of the shares.

The Finnish Tax Administration is expected to provide guidance and confirm the allocation of the acquisition cost within two months after the demerger.

Example:

If the net asset split between Sampo and Mandatum post-demerger were to be 90 per cent for Sampo and 10 per cent for Mandatum and a shareholder bought a Sampo share for EUR 40 prior to the demerger, then following the demerger, the acquisition cost in this case would be EUR 36 (0.9 x 40) for Sampo share and EUR 4 (0.1 x 40) for Mandatum share.

Please note that this answer applies only to shareholders who are generally liable to tax in Finland. Other shareholders should contact the Finnish Tax Administration or their local tax authorities for detailed tax advice.

How will the demerger affect Sampo’s results?

In 2022, the Mandatum segment’s profit before taxes was EUR 236 million before the group contribution to Sampo plc, corresponding to 14 per cent of the Group’s profit before taxes excluding extraordinary items. Excluding the Mandatum segment, Sampo Group’s profit before taxes would have been EUR 1,627 million and earnings per share would have been EUR 2.33, instead of the reported EUR 2.69.

How will the demerger affect Sampo’s future dividends?

Sampo’s future dividends would be based on P&C insurance operations’ results. Sampo’s dividend policy is to pay a stable and sustainable regular dividend that grows in line with Group’s earnings over time. According to the dividend policy, the total annual dividends paid will be at least 70 per cent of Group’s operational result.

Sampo’s regular dividend for 2022 was EUR 1.80 per share. Mandatum contributed to this with an internal dividend of EUR 150 million, representing approximately EUR 0.30 per share. Hence, when projecting the regular dividend for 2023, EUR 1.50 should be considered a prior year comparison figure.

How much dividend will Mandatum be paying in the future?

Mandatum targets to distribute EUR 500 million in cumulative ordinary dividends in 2024-2026, with upside potential from excess capital distribution. This corresponds to approximately EUR 1 per Mandatum share. More information on Mandatum’s financial targets can be found from the supplement to the prospectus published on 1 September 2023 at www.sampo.com/demerger. 

What will be Mandatum’s total number of shares when the trading commences?

As at 1 October 2023, Mandatum’s share count will be the same as Sampo’s, i.e. 501,796,752 shares.

Who will be Mandatum’s largest shareholders after the demerger?

In the beginning, Mandatum will have the same shareholder base as Sampo. At the end of August, Sampo had over 200,000 Finnish-registered shareholders and around 60 per cent of shares were held by nominee registered shareholders. More information about Sampo’s shareholders is available at www.sampo.com/investors/shareholders.

 

Stockholm-listed Sampo SDR holders

What will happen to my Sampo SDRs?

Holdings in Sampo SDRs remain unchanged.

Will I receive Mandatum shares?

Sampo SDR holders will receive the demerger consideration on or around 9 October, if the SDR holder provides the required information to SEB, issuer and custody bank for the SDR arrangement, by 15.00 (CET) on Wednesday 4 October 2023.

Each SDR holder shall inform SEB by completing the “Application form” that can be found on our website. Please note that you must have an account in Finland or that your bank has an account in Finland in order to receive the shares. 

If you do not provide correct delivery information in time for the shares in Finland, the Mandatum shares will be sold and the proceeds will, after deduction of costs, be credited to tied cash account to the VP account/Service account.

Assuming I have not provided the required information for the transaction, when will I receive the cash proceeds?

You will receive the cash proceeds on 27-31 October 2023.

For more detailed information, please contact SEB and/or your bank or broker.