Qbe Lets Iag Mull On Offer For A Little Longer

Sydney Morning Herald

Tuesday May 6, 2008

Danny John

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

QBE is expected to announce that it will keep open its bid for another few days after its second deadline passed last night without a response from IAG.

QBE had given IAG until 5pm yesterday to accept the broad outlines of its terms, which involved an offer of 0.142 of its own shares, plus 70 cents in cash, for every IAG share. QBE and IAG would not comment on the status of the latest stand-off, but it was understood that advisers to the two sides were still seeking common ground.

IAG's share price continued to hover around the overall value placed on the company by QBE's offer.

Based on QBE stock's price of $25.57, up 3 cents on the day, the deal valued IAG at $4.35 a share.

By yesterday's close of trading, IAG had risen 2 cents to $4.36, just one cent higher than the QBE bid, which was first lobbed three weeks ago.

QBE's first deadline of April 21 expired with a robust defence by IAG's 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".

IAG said QBE had struck when the insurer has been weakened by a series of bad storms that had depressed earnings since 2006, and that its bid took no account of an expected improvement in performance in coming years.

QBE had sought to keep up the pressure on IAG's directors with an offer that has helped push up the value of their company by as much as $700 million since details of the bid emerged.

That was despite another profit warning by IAG just more than a week ago, which under normal circumstances would have sent its share price tumbling, market watchers said.

Nonetheless, analysts maintained that for QBE to do the deal it would 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 was thought necessary to help swing the insurer's large retail shareholder base - of more than 900,000 individuals - behind the terms.

IAG had firmly refused to put a price on what would be acceptable to its directors, saying the latest offer grossly undervalued the company.

© 2008 Sydney Morning Herald

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