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AIG target gets rival offer
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January 27, 1998: 6:32 p.m. ET
Cendant makes unsolicited $2.7 billion bid for American Bankers Insurance
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NEW YORK (CNNfn) - Cendant Corp., which was formed a month ago by the $13 billion merger of CUC International and HFS Inc., unveiled an unsolicited $2.7 billion bid for American Bankers Insurance Group, the Parisppany, N.J.-based company announced Tuesday.
The bid comes a month after American Bankers agreed to be acquired by American International Group Inc. in a transaction valued at $2.2 billion.
Late Tuesday, American International Group Inc. said it intends to exercise its right to acquire 19.9 percent of ABIG common stock at $47 per share.
In a statement, American International said it "stands by its original commitment to merge with ABIG and will do everything it can to complete the transaction on a timely basis."
American Bankers said the company's board of directors plans to review the terms of the Cendant tender offer ``in due course.''
In a statement, American Bankers said the company's shareholders need not take any action at this time and it asked shareholders to await the response of American Bankers' board.
News of the impending takeover battle sent American Bankers stock skyrocketing. Shares of the Miami-based marketer of credit-related insurance coverage (ABI) rose 9-9/16 to 55-13/16.
"Why do we want to acquire this company? The answer is: strategic fit." said Walter Forbes, Cendant chairman.
"Credit insurance is a product category we need to be in," Forbes told reporters during a conference call.
In its two-step proposal, Cendant has offered to acquire 23.5 million American Bankers shares at $58 each in cash. Combined with its current holdings, the tender offer would give Cendant 51 percent of the company on a fully diluted basis. Cendant said it would purchase the remaining American Bankers shares in a stock-swap valued at $58 a share.
Cendant said it would have preferred to discuss its proposal with American Bankers rather than a public tender offer. But certain conditions of American Bankers' agreement with AIG prevented any discussions with other suitors.
Cendant has filed a lawsuit in U.S. District Court for the Southern District of Florida in an effort to remove the provisions, which company officials termed "highly unusual and restrictive."
One such condition prevents American Bankers from engaging in discussions until 120 days after the Dec. 22 agreement with American International Group.
Because the time span would allow enough time for AIG to close its deal, the provision represents "a virtual forfeiture of the board's fundamental mandate of protecting the interest of shareholders," Cendant officials wrote in a letter to American Bankers' board.
"There is a fiduciary duty here. It's really inconceivable to us," said Henry Silverman, president and chief executive of Cendant.
Other provisions included an option that, if exercised, would allow AIG to acquire 19.9 percent of American Bankers even in the event another bidder for American Bankers emerges.
-- by staff writer Robert Liu
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