Takeover attempt was 'a complete misjudgment'

Beazley’s takeover bid for rival Lloyd’s insurer Hardy has been “ill thought out from the start”, according to KBW analyst Chris Hitchings, while Panmure Gordon’s Barrie Cornes believes Beazley needs to offer £4 a share to attract shareholder interest.

On Monday, Beazley announced that Hardy had rejected its most recent offer of £3.30 a share without discussion. Hardy shunned Beazley’s previous offer of £3 a share on 11 October. Hardy said both offers substantially undervalue the firm.

Hitchings said he could not see why Hardy shareholders would accept an offer that, while higher than the current share price, was lower than it would be if Lloyd’s insurers were fairly valued. Nor could he understand why Beazley shareholders would be happy paying a full price for Hardy when its own shares were undervalued.

“The approach was based on the idea that when the offer for Brit was rejected, shareholders rang up [UK chief executive] Dane Douetil and said: ‘What do you mean by turning this down? We would be happy with it’, and assumed the same would happen with Hardy,” Hitchings said. “That was a complete misjudgment. Brit and Hardy are at opposite ends of the quality spectrum.”

Beazley wants Hardy shareholders to urge the board to start discussions, as the £3.30 per share offer is a 50% premium to the £2.20 that shares were trading at before the initial offer. “At some point, the shares may be worth £3.30 again, but we are talking about now,” Beazley chief Andrew Horton said. “We believe £3.30 for a company trading at £2.20 is a good deal for Hardy shareholders. It is also all cash.”

Cornes said Hardy probably rejected the bid so quickly because it had gauged what its shareholders were willing to accept. Beazley has said it will withdraw its offer if its efforts to start talks fail.