Qbe Extends Offer, Closes In On Iag
The Age
Wednesday May 7, 2008
THE $8 billion takeover tussle between QBE and Insurance Australia Group is increasingly being framed around the daily movements in their respective share prices, as the global insurer sent its contested bid into a fifth week.
QBE extended its offer for a second time, setting a new deadline of 5pm on May 19 for IAG to reconsider its refusal to engage with its rival over the merger terms first floated last month. The move came as QBE's most recent play for time expired on Monday evening, without a response from the owner of NRMA Insurance to the merger offer of 0.142 of QBE's own shares plus 70? cash for every IAG share. But with the bid having helped push up the market valuation of the troubled insurer to $8.25 billion, QBE chief executive Frank O'Halloran made it clear in a statement yesterday that the offer had been extended to focus attention on the stock price movements. He also highlighted last week's embarrassing setback for IAG, when it was forced to put out yet another warning to the ASX about lower earnings because of its exposure to higher storm damage claims. "The proposal has been extended to allow stakeholders more time to consider the impact of IAG's profit downgrade last week and the value of (our) shares," said the QBE CEO, who also announced the acquisition of five small "distribution channels", thought to be brokers, that will add $70 million to its insurance profit next year. Analysts at Deutsche Bank said QBE was gently tightening its grip on IAG, although they maintained a 10% improvement in its terms would be required for it to succeed in the battle. But while the two sides are anxious to avoid a war of words over a potential merger deal that both believe makes operational sense, IAG indicated that it saw no merit in opening formal talks about an offer it says undervalues the company. In a brief statement, IAG, whose annual profits have fallen in successive years due to weather-related claims and an ill-timed $2 billion expansion into the British insurance market, said nothing had changed since its last rejection of QBE's offer. "We view the takeover proposal as incomplete and inadequate," said a spokeswoman. But QBE underlined that by Monday night, when its scrip and cash package valued IAG at $4.33, 16% higher than the company's average market price in the three months before the April 15 approach.Over the past three weeks, IAG's shares have jumped by more than 40?, underpinned by the bid itself and pulled up by the value of QBE's rising share price, which is now $2.40 higher. The response of investors yesterday to the bid extension slightly widened the share gap between the two protagonists, this time in favour of IAG. QBE finished the day down 27? at $25.30 while IAG was unchanged at $4.36.KEY POINTS ? QBE extends offer to May 19, encouraging IAG to enter talks about merger terms.? IAG maintains the offer per share of 70? and 0.142 of a QBE share undervalues IAG.
© 2008 The Age
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