QBE makes final bid for IAG

QBE has made a revised and final A$8.7bn bid for Insurance Australia Group (IAG) after the deadline of its latest offer extension expired.

In a statement IAG confirmed it had received a revised approach from QBE on Friday. QBE and IAG will now meet on Tuesday in New Zealand in an attempt to thrash out a deal.

Despite the improved terms of the offer, which equates to an increase of around ten per cent, QBE chairman John Cloney said he felt it was unlikely the final bid would be successful. Cloney held discussions with IAG chairman James Strong over the weekend.

He said: "[Strong] has indicated that he believes our final proposal is well short of their expectations."

Frank O'Halloran, QBE chief executive, described the proposal is "fair and reasonable, given IAG's declining profitability in the past three years and the recent profit downgrade".

IAG shares fell over five per cent to A$4.20 amid fears it would reject the offer. QBE stock, meanwhile, climbed 1.5 per cent to A$25.94.

“[Strong] has indicated that he believes our final proposal is well short of their expectations.

John Cloney, QBE

Strong reiterated his position that IAG would be willing to discuss a takeover proposal on terms that appropriately reflected the value of IAG.

But the revised offer is in line with analysts' valuation estimates of IAG of between A$4.50 and A$4.75 per share.

The proposal now stands at 0.145 QBE shares and 90 cents cash for per IAG share, equating to $4.60 per IAG share - an increase of approximately 10 per cent on QBE’s original nil premium takeover proposal, and 8 per cent on the terms announced on 15 April 2008.

IAG formally rejected QBE’s initial offer of 01.42 QBE shares and 70 cents cash per IAG share 15 April. QBE has since extended its informal offer on two occassions.

The IAG statement said: "Yesterday IAG’s Chairman, Mr James Strong spoke to the QBE Chairman John Cloney to advise that the Board of IAG would meet on Tuesday in New Zealand and discuss the proposal."