Iag Dividend Under Threat
The Age
Friday April 18, 2008
INSURANCE Australia Group's army of small shareholders could face a cut in their final dividend if QBE succeeds in taking over the company.
The initial proposal lodged with IAG, and a follow-up offer valuing the embattled group at $7.43 billion, contains a commitment for its 900,000-plus retail investors to receive a second-half payout that would be the lesser of its profits over that period, or 15? a share. But such a move implies a cut in its last-half dividend and the total payment for the full year. IAG declared an overall 2007 distribution of 29.5? a share. This was despite a second successive fall in annual profit after claims resulting from catastrophic storms ripped through its bottom line.At its half-year results announcement early last month, the group decided to maintain the interim dividend at 13.5?, even though net earnings fell even further to $110 million. Faced with growing unease among shareholders, IAG chose to maintain the dividend, partly to underpin its falling stock price and as a sign that it expected its second-half earnings to stage a recovery. A BusinessDay analysis of QBE's latest informal offer indicates a dividend cut is in the offing if its takeover bid is successful on the existing terms. QBE did not respond to questions last night. The dividend issue emerged as the two companies appeared no closer to resolving their dispute over the price that QBE has offered to pay for the country's largest domestic household and motor vehicle insurer. Investors are continuing to underline the need for QBE to come up with better terms than the package of 0.142 of its own shares and 70? cash per security that values IAG at about $4 a share, compared with yesterday's price of $4.30. Its stock slipped 8? while QBE rose 35? to $23.55 as the market indicated that a sweetened bid of about $8.3 billion might be enough to persuade IAG's board to recommend a bid to its shareholders.
© 2008 The Age