Australia’s QBE Insurance Group tabled a new offer late Friday to take over the Insurance Australia Group (IAG). The “increased final proposal” offers IAG share holders 0.145 QBE shares and 90 cents cash for each IAG share, “which,” QBE said, “is equivalent to a consideration of A$8.7 billion [US$8.3156 billion] or A$4.60 [US$4.396] per IAG share based on QBE’s closing share price on 16 May 2008.”
QBE added that the “final scheme proposal represents a very attractive premium of 24 percent to IAG’s 1 month and 3 month VWAP prior to our proposal of 10 April 2008.” (See also IJ web site – https://www.insurancejournal.com/news/international/2008/04/16/89165.htm). QBE’s CEO, Frank O’Halloran, stated: “QBE considers its final proposal is very fair and reasonable given IAG’s declining profitability in the past three years and the recent profit downgrade. The recent rise in QBE’s share price means that our final proposal still meets QBE’s acquisition criteria including earnings per share accretive in year one.”
IAG confirmed that it had received “a marginally revised takeover proposal from QBE Insurance Limited late on Friday,” as indicated. IAG said the new proposal “represents an increase of approximately 10 percent on QBE’s original nil premium takeover proposal and 8 percent on the terms announced on 15 April 2008.”
Both Groups confirmed that they have been in discussions concerning the offer over the weekend in an effort to determine “whether an acceptable proposal would be forthcoming, including a takeover premium that adequately reflected the value of IAG.”
On Sunday IAG’s Chairman, James Strong spoke to the QBE Chairman, John Cloney. IAG’s Board has scheduled a meeting on Tuesday in New Zealand to discuss the proposal. However, Strong indicated that, while a formal decision would not be made until the Board meeting, “the initial reaction of the IAG Directors was that the proposal fell short of fair value.”
Cloney confirmed that he had had further discussions with IAG’s Chairman, and had been told that the Group considered the new offer to be “well short of their expectations.” He added that QBE will wait for “a formal notification from IAG on our final proposal following their board meeting.
Sources: QBE – www.qbe.com; IAG – www.iag.com
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