Australian insurer rejects QBE bid as too low
Australian insurer IAG has rejected an audacious A$7.6bn (£3.6bn) takeover bid by QBE.
QBE broke cover this week, ending months of speculation that the company was gearing up for a move on its smaller rival.
An initial cash and shares offer, valuing IAG at A$7.09bn, was tabled last Thursday and rejected by the IAG board. QBE returned last Friday with a further offer, worth A$7.6bn, which was also rejected.
IAG chairman James Strong said: “The QBE proposal seeks to take advantage of the current weakness in IAG’s share price and does not reflect the long term prospects and value inherent in IAG.
“The price proposed which represents only a 1% premium to the closing [share] price on Friday is totally inadequate.”
IAG’s share price reflected a low point in the insurance cycle in the company’s core markets and the impact of severe weather events in the past year, Strong said.
He indicated that IAG would be open to a further offer. He said: “The price needs to reflect the value that the IAG businesses would contribute to QBE, including the synergies to be generated.”
“The QBE proposal seeks to take advantage of the current weakness in IAGs share price… it is totally inadequate.
IAG Chairman James Strong
It was unclear if QBE would up its offer.
Strong added that he was disappointed that QBE had chosen to make public a proposal which it had requested IAG keep confidential.
QBE chief executive Frank O’Halloran said: “We approached IAG because we believe that a merger would be positive for both IAG and QBE shareholders. A merger would be transformational for both companies and create an enlarged group which would be in the top 15 global general insurers.”
QBE claimed the takeover would save A$300m in annual net pre-tax synergies within two years, in addition to more than A$400m in diversification benefits from excess risk margins in outstanding claims.
O’Halloran added that QBE’s proposal was positive for both IAG and QBE shareholders.
IAG writes more than A$7.5bn in annual premiums. Its UK businesses include Equity Group and Hastings Direct. QBE writes over A$10bn in gross written premium globally.
