Qbe Decides Its Time To Turn Up The Heat On Iag

The Age

Tuesday May 6, 2008

Danny John

GLOBAL insurer QBE will try today to tighten the screws on Insurance Australia Group by extending the period for IAG directors to reconsider their hostile rejection of QBE's $8 billion-plus merger offer.

An announcement is expected this morning from QBE that it will keep open its bid for a few more days after its second deadline passed without response from IAG last night.

QBE had given IAG until 5pm yesterday to accept the broad outlines of its terms, which involve an offer of 0.142 of its own shares plus 70? cash for every IAG share.

QBE and IAG were unable to comment about the status of the latest stand-off, but advisers to the two sides are believed to be still seeking common ground.

Meanwhile, IAG's share price continues to hover around the overall value of QBE's offer.

Based on QBE's share price of $25.57, up 3?, the deal values IAG at $4.35 a share. By yesterday's close of trade, IAG had risen 2? to $4.36, just 1? higher than the QBE bid made three weeks ago.

The first deadline of April 21 expired with a robust defence from IAG chairman James Strong, who said the company did not intend to respond any further to QBE's overtures.

He said the latest extension had "no significance".

However, its would-be partner has sought to keep the pressure on IAG's directors with an offer that has helped push the value of their company ahead by as much as $700 million since details of the bid emerged.

This was despite another IAG profit warning released just over a week ago, which normally would have sent its share price tumbling, market watchers say.

Nonetheless, analysts maintain that for QBE to get the deal over the line it will have to pay the equivalent of between $4.50 and $4.80 a share to ensure the support of IAG's board.

Such a recommendation is thought necessary to help swing the insurer's large retail shareholder base.

But IAG has firmly refused to put a price on what would be acceptable to its directors, saying only that the current offer was inadequate and signif-icantly undervalued the company.

© 2008 The Age

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