QBE Insurance Group walked, and down went its shares and that of its ‘potential’ takeover target, Insurance Australia Group.
IAG confirmed its opposition to the revised non binding indicative ‘takeover offer’ from QBE late Tuesday evening after a board meeting in New Zealand, and the shares fell yesterday, closing down 24c at $3.98.
QBE revealed its decision to withdraw at 10.18 and in those minutes the shares hit a high of $25.98, up more than 30c on Tuesday’s close, before they started a long fall towards $25. They ended the day at $25.16, down 2% or 51c.
QBE said it would look at other acquisition opportunities with CEO, Frank O’Halloran saying that "QBE will now continue to focus on the pipeline of acquisitions that have been accumulating in recent months.
"The pipeline includes a range of opportunities in the Americas, Europe, Asia and Australia."
Some investors wondered if QBE would return, as it can because it didn’t actually make a bid for IAG. That could have been behind the weakness in late trading in QBE shares.
And it seems it was that talk about more deals that spooked a market that had already been unsettled by a big fall on Wall Street and losses in Asia off the back of a record price for oil and more worries about some financial groups in the US like one of QBE’s major competitors, American Insurance Group.
American Insurance Group revealed that it was looking for an extra $US6.5 billion in new capital, to take its raisings in the past week to a total of $US20 billion.
It had been thought AIG was looking for around $US13.5 billion in new capital to cover the losses incurred over the past six months. This led investors to wonder if there were more write downs to come out of the giant, and whether QBE might be caught up in the mess as the US insurance market was unsettled.
IAG slammed the QBE shares and cash "offer" (which valued IAG at around $4.62) as being "priced opportunistically to take advantage of the short-term weakness in IAG’s share price", which it said was primarily caused by a low point in the insurance cycle.
"QBE understands its final proposal on price was well short of IAG’s expectations," QBE said yesterday.
IAG reissued its statement from Tuesday night on the ASX just after noon yesterday and in it made a couple of decent points:
“During the past five weeks, IAG has engaged with QBE in discussions and held a number of meetings recognising that considerable synergies could be achieved through a combination of the two businesses. During these discussions QBE has had ample opportunity to put forward a proposal that recognises IAG’s value but has failed to do so," IAG Chairman, Mr James Strong, said.
“We remain willing to engage further with QBE with a view to securing a fully developed offer that provides an acceptable premium and price.
“Alternatively, if QBE considers that its proposal is sufficiently attractive it is able to put a fully developed offer directly to IAG’s shareholders.
“Discussions to date with QBE have not explored other important terms and conditions. An essential issue in any transaction involving insurance companies is a comprehensive understanding of each of the businesses including adequate due diligence by both parties particularly given the long tail nature of some of the risks underwritten in those businesses.”
"The underlying performance of the Group is improving and further steps are being developed in a review of all operations and structures, including the UK businesses. The market and shareholders will be kept informed of these initiatives."
