|
Axa in cross-channel bid
|
 |
February 1, 1999: 10:49 a.m. ET
Acquisitive French insurer offers $5.67B for U.K.'s GRE
|
LONDON (CNNfn) - Using a U.K.-based subsidiary as a pair of giant pincers, acquisitive French insurance group Axa has offered to pay $5.67 billion dollars for its cross-channel rival, Guardian Royal Exchange.
Under terms of the transactions, Paris-based Axa's 71.6 percent-owned U.K. unit, Sun Life and Provincial Holdings, will offer GRE 249 pence in cash and 0.243 new Sun Life shares for each GRE share. The deal values each GRE share at 389 pence.
Sun Life has agreed to spin off Guardian Royal Overseas for 972 million pounds in cash, and to sell Guardian Royal Exchange U.S. to Liberty Mutual for 888 million pounds ($1.46 billion).
The offer represents a roughly six percent premium to GRE's closing stock price of 367 pence on Friday, prior to the announcement of the deal.
It also marks a more than 40 percent premium over the 275-pence per-share price as of Nov. 16, 1998,, the last day before speculation broke about a possible offer for GRE.
The deal, one of two blockbuster mergers out of France Monday, along with Societe Generale's $17.2 billion bid for Paribas, underlines the hastening pace of European consolidation in sectors ranging from finance to aerospace.
Axa's offer for GRE capped a come-from-behind takeover quest in which the French insurer beat out rival bidders Eureko - a pan-European consortium of seven insurers- and the U.K.'s Royal & Sun, which were both widely seen as prospective purchasers.
Royal & Sun lost favor after GRE board members voiced suspicions about elements of the company's paper bid, while Eureko fell by the wayside after failing to complete due diligence and because of other conditional aspects of its offer, London's Financial Times reported.
Shares of Sun Life (SLP) slid nearly seven percent, or 38-1/2 pence, to 542-1/2 pence on the FTSE Monday afternoon, after Commerzbank downgraded its rating on the company to "hold" from "buy".
Conversely, the bank upgraded Royal & Sun's (RSA) rating to "buy" from "hold", sparking a 28-pence leap in the stock price to 490 pence, a 6.06 percent surge.
Explaining the downgrade of Sun Life, a Commerzbank spokeswoman said investors who had bought into the company for its heavy life business leanings would now find their original rationale lacking, Reuters reported.
An AXA-GRE link-up would create the number-three general insurer in the U.K. and the number-two British healthcare insurer.
In terms of asset management, the combined group would rank fourth in the U.K., with about 55 billion pounds under management.
Axa's purchase of GRE is consonant with a growth strategy that has seen the French company over the past 18 months use provincial insurers as vehicles for expansion.
A London-based analyst who wished to remain unidentified said the deal may help Guardian overcome an underperforming legacy in its non-life insurance businesses, which generate about 70 percent of the company's business.
While GRE has tended to post break-even results in the non-life businesses in recent years, the company is still seen to be soft in the area after a money-losing period in the early 1990s.
"The question is," the analyst asked, "Can Axa and Axa Sun Life and Provincial's management do the non-life business better than GRE has done in the past?"
Axa said it would help Sun Life fund the purchase by issuing about 224 million new Sun Life shares and up to 2.207 billion pounds in cash. After completion of the deal, Axa's stake in the enlarged group will be reduced to about 56.1 percent from 71.6 percent.
The enlarged group will generate 60 percent of its earned premiums from life insurance.
The companies also said the acquisition would enhance Sun Life's earnings in 1999 and thereafter.
The companies did not disclose how many jobs, if any, may be affected by the combination.
Shares of Guardian Royal (GARD) were off 1.22 percent, or 4-1/2 pence, at 364 pence Monday afternoon in London, while Axa (PCS) stock eased 0.55 percent to 127.1 euros.
|
|
|
|
|
 |
|
