QBE Insurance kept the market wondering Monday, and then extended its suggested offer for the proposed takeover of Insurance Australia Group by another two weeks.
QBE’s proposal of 0.142 QBE shares and 70 cents cash for each IAG share was due to expire at 5 pm Monday. There was no news of an extension, leading to some reports of it expiring, while other reports suggested a statement would come today.
Which it did: although you would expect it would have been just as easy to have extended the offer on Monday evening. The delay seems to have been a tactic to add pressure to shareholders.
The unsolicited and incomplete offer, which has been rejected by the IAG board as inadequate, will now expire on May 19, if it isn’t extended again by QBE.
It’s the second extension BY QBE, which needs to convert the bid from hostile to one recommended by the board because of the large number of small shareholders.
QBE chief executive Frank O’Halloran said in the statement that IAG shareholders needed more time to consider the ramifications of a profit downgrade announced by IAG last week.
"QBE remains interested in seeing through a friendly merger with the recommendation of IAG’s board,” he said, which is recognition that the IAG board holds the whip hand right now.
At the market close Monday, the offer valued IAG at $4.33 per share or $8.13 billion. IAG shares ended Monday and yesterday at $4.36.QBE shares fell 27 cents to $25.30, which values IAG at $4.29.
"QBE reserves the right to extend the period during which it is will to discuss the proposal with IAG,” the company said.
Meanwhile, QBE said in a separate announcement that it was buying new distribution channels in five separate transactions. The details of just what companies were being acquired, wasn’t disclosed in the QBE statement.
"They will be earnings-per-share accretive in year one,” Mr O’Halloran said.
QBE said the acquisitions are expected to produce additional net written premium of about $200 million and incremental insurance pre-tax profit of about $70 million in the 2009 financial year.
The purchases would be funded from existing resources.
Mr O’Halloran said the acquisitions would secure the group’s existing businesses in Australia and the US.
