Qbe Ready To Walk Away From Iag
The Age
Tuesday May 20, 2008
GLOBAL insurer QBE is on the verge of walking away from its hoped-for merger with domestic rival Insurance Australia Group after its target yesterday rejected a third and seemingly last takeover offer worth $8.7 billion.
With the prospects of an agreed deal rapidly diminishing in the high-stakes poker-style gamble being played out, QBE declared a slightly sweetened share and cash terms tabled over the weekend as "final", in a sign it was not prepared to go higher. QBE chief executive Frank O'Halloran indicated in a statement to the ASX that the five-week battle was nearing its end, even if it meant his company would withdraw. "QBE considers its final proposal is fair and reasonable given IAG's declining profitability in the past three years and its recent profit downgrade," Mr O'Halloran said. But IAG, which has been struck by huge claims for storm damage at the same time as its much-vaunted expansion into Britain has yet to pay off, said the terms still "fell short of fair value". Its board is due to give its formal response to QBE after a board meeting in New Zealand today. But it is almost certain to maintain the current hostile stand-off by making it clear that a much higher bid is required. Analysts say IAG is looking for about $5 a share, which would value the company at $9.45 billion - $700 million higher than QBE's latest approach and nearly $2 billion more than the insurer was worth just over a month ago. The response from investors and analysts was almost equally emphatic, with market watchers saying that unless both sides were prepared to compromise the bid was effectively dead.Broker Goldman Sachs JBWere said the initial response from IAG did "not sound promising". "We believe that many of IAG's institutional shareholders will want the board to engage with QBE, but we are not sure this will be enough to bring it to the table," the broking company added. After setting IAG a deadline of 5pm yesterday to accept a lower proposal made five weeks ago, QBE secretly approached IAG on Friday with an improved deal of 0.145 of one of its shares plus 90? cash.That was an 8% increase over its second offer, which QBE tweaked after its initial confidential advances to IAG on April 11 opened with a "nil premium" merger proposal. IAG rejected this as far too low. Since then, IAG has refused to engage with QBE about its plan to create a near-$30 billion international and domestically dominant insurer unless QBE made an offer that reflected full value. Yesterday, IAG increased the pressure on QBE to reopen negotiations. But the IAG board, led by chairman James Strong, has opened itself to attack from investors if QBE withdraws, as IAG would face a substantial drop in its share price.KEY POINTS ? Target rejects a third and seemingly last takeover offer worth $8.7 billion.? The IAG board has opened itself to attack from investors if QBE withdraws.BACKPAGE? Michael West comment
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