Australian insurer extends offer as IAG issues second profit warning this year.
QBE looks set to enter official takeover talks with IAG after it extended its A$8bn (£3.8bn) offer for the company by a further fortnight.
The news follows IAG’s issuing of its second profit warning of the year last week, and the expiration of QBE’s previous deadline extension of 5 May. IAG formally rejected QBE’s offer on 15 April on the ground that it grossly undervalued the A$7.4bn GWP business.
IAG chief executive Michael Hawker said that QBE’s proposal was inadequate and incomplete. He said: “We have had private discussions with [QBE] and they have chosen to put them in the public domain.”
Despite QBE making no official bid for IAG, it is understood that pressure is being put on the IAG board by some of its shareholders to enter formal negotiations with QBE.
As QBE’s share price has risen in recent weeks, the value of its offer – amounting to 0.142 of its own share total plus 70 cents in cash for every IAG share – has increased.
Hawker added: “They haven’t formally put anything to us. What they have done now is to create an artificial deadline to use public pressure to get us engaged. We now wait to see if they will be putting a formal offer to our board to consider.”
IAG chairman James Strong added that the latest extension had no significance.
On the back of recent developments, analysts have reduced their valuation estimates of IAG from A$5 per share to A$4.50. QBE’s offer currently values the business at A$4.35.
As Insurance Times went to press, IAG shares were trading at A$4.36. Despite the profit warning, IAG shares have held steady in the past two weeks – propped up, analysts said, by QBE’s approach.
Analysts said it was unclear if QBE would enhance its terms, but concluded that a sale was increasingly likely.