Demutualization

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.[6] 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 first U.S. exchange or commodities exchange to demutualize into a joint stock corporation.[7] The Chicago Mercantile Exchange had its IPO on December 6, 2002.

The Chicago Board of Trade similarly carried out an IPO in 2005, having previously been "... a self-governing, self-regulated Delaware not-for-profit, non-stock corporation that serves individuals and member firms".[8] The Stock Exchange of Hong Kong underwent similar process of demutualization and was publicly traded.[9]

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 category the subsidiary SIX Swiss Exchange AG.

Over 200 US mutual life insurance companies have demutualized since 1930. At the end of the 20th century and beginning of the 21st century numerous large mutuals such as Prudential, MetLife, John Hancock, Mutual of New York, Manulife, Sun Life, Principal, and Phoenix Mutual decided to demutualize and return to policyowners all the profits they had accumulated as mutual life insurers. Policyowners were awarded cash, stock and policy credits exceeding $100 billion in a wave of demutualizations, which have been regarded by some as very rewarding to the new owners although the effect on customers is not discussed. Others show that the demutualization process is detrimental to customers.[2]

The boards of directors of other mutual companies, which include Northwestern Mutual, Massachusetts Mutual, New York Life, Pacific Life, Penn Mutual, Guardian Life, Minnesota Life, Ohio National Life, National Life Group, Union Central Life, Acacia life, and Ameritas Life decided to either remain 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.[10] Mass Mutual Financial Group's Web site defines life insurance policy dividends.[11]

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 made an initial public offering of equity stock in 2005.[12]

Another large example is Kerry Co-operative Creameries of Ireland, a milk and meat processor that partially demutualized in 1986 under the so-called 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. [13] 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.[14]

Murray Goulburn Co-operative[15] and Australia's 2016 dairy crisis[16] 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 home 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 Abbey National, the second largest, in 1989, and including the Halifax Building Society, the largest, soon converted into joint stock banking companies, some of which were subsequently acquired by other banks. Many societies soon became targets of speculative "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 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.[17]

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 well as the many agricultural supply cooperatives that demutualized, a small number of general retail 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 most or all of the steps necessary to demutualize. In 2008, a Swiss competition regulator recommended demutualization to Switzerland's leading supermarket chains, Coop and Migros.[18]

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.