Australian conglomerate Wesfarmers Limited has made a conditional cash offer of A$4.50 (US$3.434) per share for the entire issued capital of OAMPS Limited, the country’s largest publicly-owned insurance broker. The offer values OAMPS at A$700 million (US$534 million).
The Company’s board has unanimously recommended that OAMPS shareholders “accept the Wesfarmers offer in the absence of a superior proposal and has indicated that the directors intend to accept this offer for their own holdings of OAMPS shares on that basis,” said Wesfarmers’ bulletin.
Other highlights detailed in the offer are as follows:
— Wesfarmers has a relevant interest in 9.8 percent of OAMPS ordinary shares through a combination of outright purchases and a pre-bid acceptance agreement
— The offer represents a 29 percent premium to the OAMPS volume weighted average share price for the 90 trading days preceding this announcement
— The OAMPS broking business will continue to operate separately from Wesfarmers’ combined underwriting businesses to maintain its independence in the market
— The combined business will provide improved scale and penetration in specialist insurance areas with various platforms for growth. The Wesfarmers Insurance Division will have pro forma 2006 gross sales of A$2.1 billion [US$ 1.6 billion]
— Wesfarmers’ Bidder’s and OAMPS’ Target’s Statements are expected to be lodged shortly and to be dispatched to OAMPS shareholders in approximately 2-3 weeks, with the scheduled closing date of the offer expected to be before the end of October 2006 (unless extended)
OAMPS is also a specialist underwriter and a financial services provider with gross sales for the 2006 financial year of around A$1 billion (US$763 million). “If successful, the transaction will significantly expand the Wesfarmers Insurance Division presently made up of Wesfarmers Federation Insurance (WFI), Lumley General Australia (LGA) and Lumley General New Zealand (LGNZ),” said the announcement. “Gross sales of the Wesfarmers Insurance Division for the 2006 financial year were approximately A$1.1 billion [US$840 million].”
If the deal is successfully completed, “OAMPS will form part of the Wesfarmers Insurance Division which will continue to be run by the present Managing Director, Bob Buckley,” the bulletin continued. “The combined business will provide improved scale and penetration in specialist areas and broader career opportunities for staff. OAMPS’ underwriting capabilities will continue to provide specialist expertise to the market.”
Wesfarmers Managing Director, Richard Goyder, commented: “This is a logical and value-adding proposal for our shareholders and OAMPS’ shareholders in an area in which we have expertise and have achieved very good results. It builds on our 2003 acquisition of the Lumley insurance businesses in Australia and New Zealand which have been successfully integrated into our insurance division.
“We believe our offer price represents an appropriate premium and is a full and fair value for OAMPS as a whole. The Wesfarmers Insurance Division and OAMPS businesses are a strong strategic fit. Both businesses focus on shareholder returns, developing employees and customer service.”
He also noted that there “has been considerable consolidation in the insurance industry at the underwriting level and this is likely to flow on to insurance broking. The combination of OAMPS and the Wesfarmers Insurance Division will create a substantial business which will be a strong competitor in the insurance sector in Australia.
“The existing underwriting capacity of OAMPS is limited by its size and relative balance sheet strength. The combination of Wesfarmers’ strong balance sheet and A- credit rating and OAMPS’ specialist underwriting skills will create opportunities to access new underwriting niches and to optimize reinsurance arrangements.
Commenting on the attractiveness of the offer to OAMPS shareholders, its Managing Director Tony Robinson indicated: “The Board of OAMPS unanimously recommends the Wesfarmers offer, in the absence of a superior proposal.” He also noted that the Board “has in the past considered various proposals for creating shareholder value, such as the de-merger of OAMPS’ underwriting and broking activities. OAMPS has also recently received approaches from private equity houses with an interest in implementing transactions involving OAMPS. The Board of OAMPS believes the Wesfarmers offer represents the best outcome for OAMPS shareholders, both in terms of price and certainty.
“We believe there are also benefits for the business and staff of OAMPS from this transaction. Wesfarmers’ strengths will help accelerate the growth and competitiveness of the businesses. This, coupled with the opportunities available in a larger organization, mean it is a tremendous outcome for all our stakeholders.” He also noted that he sees a “clear advantage in joining with an organization with existing insurance operations and familiarity with the regulatory requirements of this sector.”
Managing Director of the Wesfarmers Insurance Division, Bob Buckley, stated: “Wesfarmers fully understands that OAMPS is a people driven business. We will preserve the independence of the OAMPS broking activities, while creating an environment for both businesses to leverage off their combined strengths. This will deliver better results for customers and greater career opportunities for employees.”
The announcement also noted that Wesfarmers plans to “continue the broker acquisition program of OAMPS. It is expected that substantial industry consolidation opportunities will continue to emerge in Australia and offshore, some of which may be better accessed with Wesfarmers’ balance sheet strength. It is believed that synergies may exist between the Wesfarmers and OAMPS underwriting businesses and other corporate level synergies will be realized following the delisting of OAMPS.”
Full details of the proposed acquisition as well as additional information about the companies may be obtained at: http://www.wesfarmers.com.au/.
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