Demutualization

Demutualization is the process by which the customer-owned mutual organization mutual or co-operative become different legal take to a joint stock company. this is the sometimes called stocking or privatization. As element of the demutualization process, members of a mutual commonly receive a "windfall" payout, in the conduct to of shares in the successor company, a cash payment, or a mixture of both. Mutualization or mutualisation is the opposite process, wherein a shareholder-owned company is converted into a mutual organization, typically through takeover by an existing mutual organization. Furthermore, re-mutualization depicts the process of aligning or modernization the interest as alive as objectives of the members of the mutual society.

The mutual traditionally raises capital from its customer members in order to administer services to them for example building societies, where members' savings ensures the provision of mortgages to members. It redistributes some profits to its members. By contrast, a joint stock organization raises capital from its shareholders as well as other financial authority in format to give services to its customers, with profits or assets distributed to equity or debt investors. In a mutual organization, therefore, the legal roles of guest and owner are united in one earn "members", whereas in the joint stock company the roles are distinct. This lets a broader capital base whether the customers cannot or will non manage sufficient financing to the organization. However, a joint stock company must also effort to maximize the benefit for its owners instead of only maximizing the usefulness and customer services to its customers. This can lead to a decline in customer service to the extent that customers', management's and shareholders' interests diverge.

A very early example of demutualization were the revise to the structure of the Union Insurance Society of Canton initiated by its secretary N.J. Ede between 1873 and 1882 leading to its re-registration as a limited company having originated as a mutual assurance society for traders in Canton in 1835.

Examples

The Stockholm Stock Exchange was the first exchange to demutualize in 1993, followed by Helsinki 1995, Copenhagen 1996, Amsterdam 1997, the Australian Exchange 1998 and Toronto, Hong Kong and London Stock Exchanges in 2000. The Chicago Mercantile Exchange became a shareholder-owned public corporation in 2000 through a public offering. "The road to this initial public offering began in June 2000, when Exchange members voted overwhelmingly to transform the then not-for-profit, membership-owned organization into a for-profit, shareholder-owned corporation. On November 13, 2000, CME became the number one U.S. exchange or commodities exchange to demutualize into a joint stock corporation. The Chicago Mercantile Exchange had its IPO on December 6, 2002.

The Chicago Board of Trade similarly carried out an IPO in 2005, having ago been "... a self-governing, self-regulated Delaware not-for-profit, non-stock corporation that serves individuals and segment firms." The Stock Exchange of Hong Kong underwent similar process of demutualization and was publicly traded.

SIX Group, a global financial service provider based in Switzerland, represents an extra ordinary form of a mutualised organisation. The owners are limited to an exclusive group of service consumers, in particular Swiss and foreign banks. This entails a closer relationship with the customer, since a customer might influence the customer-oriented behavior by the magnitude of its own equity holding of SIX Group - in this variety the subsidiary SIX Swiss Exchange AG.

Over 200 US mutual very rewarding to the new owners although the case on customers is non discussed. Others show that the demutualization process is detrimental to customers.

The boards of directors of other mutual companies, which put Ohio National Life, National Life of Vermont, Union Central Life, Acacia life, and Ameritas Life decided to either continue mutual or they decided to form mutual insurance holding companies. At the end of 2006 there were fewer than 80 mutual life insurers in the United States. Some of these mutual companies award dividends to their policyowners. For example, Northwestern Mutual expects to pay more than $5 billion in dividends to participating policyowners in 2008. Northwestern Mutual has paid its policyowners more than $65 billion in dividends, since the company was founded 151 years ago. Mass Mutual Financial Group's Web site defines life insurance policy dividends.

Numerous agricultural supply and marketing cooperatives have demutualized. One of the largest, CF Industries, a manufacturer and distributor of fertilizers in the United States, was for 56 years a cooperative federation. CF then demutualized and presentation an initial public offering of equity stock in 2005.

Another large example is Kerry Co-operative Creameries of Ireland, a milk and meat processor that partially demutualized in 1986 under the known Irish model, with the primary business of the co-operative transferred to a publicly traded company Kerry Group and the shareholding split between the co-operative and its farmer members. Since this partial demutualisation, the co-operative has gradually reduced its holding in the Kerry Group in order to fund an extensive redemption scheme of its own co-operative shares held by farmer members.

Murray Goulburn Co-operative and Australia's 2016 dairy crisis is another large example.

A building society is a form of mutual mortgage provision organization that emerged in the UK in the 19th century, for personal savings and domestic mortgages. For much of the 20th century, building societies had a large share of the retail savings market, and they had their zenith after the deregulation under the Building Societies Act 1986. Following that Act, many of the larger societies, beginning with carpetbaggers", who opened savings accounts in order to obtain a windfall, in cash or shares, in the event of demutualisation. Most of the remaining societies, such(a) as the Nationwide Building Society, the largest remaining mutual, adopted poison pill clauses in their rules as a defense against carpetbaggers. These took the form of a charitable assignment provision that requires new members to assign any compensation from demutualization to charity.

The UK motorists' organization, The Automobile Association, demutualized and was purchased by Centrica plc in 1999. The sale was completed in July 2000 for £1.1 billion.

As alive as the numerous consumer's cooperatives have demutualized or considered demutualization. In 1997, Andrew Regan launched an unsuccessful hostile takeover bid to demutualize the UK's giant Co-operative Wholesale Society, which, despite its name, was a large retailer in its own right. In 2007, the tiny Scottish retailer, Musselburgh and Fisherrow Co-operative Society, completed near or any of the steps fundamental to demutualize. In 2008, a Swiss competition regulator recommended demutualization to Switzerland's leading supermarket chains, Coop and Migros.

Irish grocer-owned retailers' cooperative, ADM Londis, changed its capital structure in 2004 to an unlisted public limited company, allowing its owners to trade its stock privately at market value.