Stalemate as Australian insurers fail to agree revised bid.
The board of Insurance Australia Group (IAG) has rejected an improved takeover offer from QBE, which values IAG at A$8.7bn (£4.3bn).
QBE contacted IAG last Friday with a revised offer of 0.145 QBE shares and 90 cents cash for each IAG share, equating to A$4.60 per IAG share. The Australian insurance giant said its offer was final, raising the stakes in a takeover battle that has dragged on for over a month.
On Tuesday, IAG said it could not recommend the “inadequate and incomplete” proposal to shareholders.
In a statement, IAG said the revised offer was priced opportunistically to take advantage of short term weaknesses in IAG’s share price and did not adequately reflect IAG’s underlying value, or the synergies that a merger with QBE would create.
IAG chairman James Strong said QBE had ample time to put together a proposal that recognised IAG’s value, but had failed to do so. He said QBE could put its offer direct to IAG shareholders if it considered it sufficiently attractive. Strong added that IAG was still willing to consider a more fully developed offer that provided an acceptable premium and price.
QBE’s improved proposal was 10% higher than QBE’s original nil premium takeover proposal and within the range analysts have said was fair.
On announcing the revised offer, QBE chief executive Frank O’Halloran said: “QBE considers its final proposal is fair and reasonable given IAG’s declining profitability in the past three years and the recent profit downgrade.”
IAG’s share price rose on the news, prompting speculation that QBE might initiate a hostile takeover.
As Insurance Times went to press IAG share were trading at A$4.31, up nearly 20 cents on Tuesday’s opening share price.
Last month IAG rejected two cash and share takeover proposals from QBE, which had kept its offer open until 19 May, but the two sides failed to agree a deal.
QBE has been keen to obtain a recommendation from IAG's board for its proposal, as it sees this as important to gaining the support of IAG's large retail shareholder base.
IAG has been vulnerable to a takeover because of its poor trading results, owing to the performance of its UK business, and falling share price. Some larger shareholders have been pressing for a deal with QBE, according to Australian press reports.
QBE had made no formal response to the rejection as Insurance Times went to press.