QBE has extended its $7.43 billion scrip and cash takeover proposal for IAG until May 5. It is also putting additional pressure on the IAG board by directly appealing to IAG’s army of 900,000 retail shareholders and warning that another rejection may see the offer collapse.

Last week IAG Chairman James Strong rejected QBE’s offer of 0.142 QBE shares and 70c for each IAG share as “totally inadequate”.

But QBE CEO Frank O’Halloran said this morning the proposed merger would allow IAG shareholders “to participate in immediate and sustainable wealth creation through QBE’s global and product spread” and “provide the opportunity to be part of a merged group that is ranked in the top 15 global general insurers”.

He says the proposal represents a 12% premium above IAG’s volume weighted average price over the three months prior to the offer and is more than 14 times IAG’s projected earnings for the 2009 financial year, based on analysts’ consensus estimates.

Mr O’Halloran warned IAG shareholders QBE will look elsewhere if their board again rejects the offer. “We remain interested in seeing through our proposal if a friendly merger through a scheme of arrangement can be agreed,” he said. “QBE will continue to focus on converting other opportunities in various parts of the world.”

IAG’s share price opened trading today at $4.36.