IAG: it’s all about the price QBE is prepared to pay
QBE’s long-expected move on the No 2 local insurer, announced last week, is dominating industry news. IAG Chairman James Strong has not resisted the QBE move on his company, but has been at pains to emphasise that it’s a proposal rather than an outright bid.
QBE’s offer appears to value IAG at $7.43 billion, but Mr Strong rejected it on Wednesday as “totally inadequate”. Speaking on the ABC’s Inside Business yesterday, Mr Strong said the QBE move was “uninvited”.
“I think it’s really important to remember that this was a proposal,” he said. “It’s not actually a bid; it’s incomplete, and therefore we certainly don’t regard the company as being on the market.”
Analysts are sticking to their contention that the only major point is the price. Mr Strong told Inside Business: “We’ve told QBE what we think of the proposal. You know, 1% above the market price – I don’t need to comment further about that.”
Analysts have generally praised the takeover move, which the two companies began discussing about two weeks ago. They see QBE benefiting by bringing scale to its Australian operations, which at present only contribute 20% to its overall earnings.
Australia would become QBE’s largest territory in terms of premium income, and it would become the world’s 15th-largest insurer, with annual premiums of more than $22 billion.
QBE derived a fifth of last year’s $12.4 billion gross earned premium from its Australian business. This would jump to 39% in the event the IAG board accepts an improved offer from QBE, according to Credit Suisse figures.
The combined entity would derive 29% of its premiums from Europe, 23% from the Americas and 9% from the wider Asia/Pacific region.
But analysts have also warned that IAG’s 900,000 “mum and dad” shareholders give Mr Strong unusual leverage in negotiations. While institutional investors are expected to favour a merger/takeover, the retail shareholders – a hangover from the demutualisation of NRMA Insurance in 2000 – are likely to take their lead from Mr Strong.
QBE’s offer appears to value IAG at $7.43 billion, but Mr Strong rejected it on Wednesday as “totally inadequate”. Speaking on the ABC’s Inside Business yesterday, Mr Strong said the QBE move was “uninvited”.
“I think it’s really important to remember that this was a proposal,” he said. “It’s not actually a bid; it’s incomplete, and therefore we certainly don’t regard the company as being on the market.”
Analysts are sticking to their contention that the only major point is the price. Mr Strong told Inside Business: “We’ve told QBE what we think of the proposal. You know, 1% above the market price – I don’t need to comment further about that.”
Analysts have generally praised the takeover move, which the two companies began discussing about two weeks ago. They see QBE benefiting by bringing scale to its Australian operations, which at present only contribute 20% to its overall earnings.
Australia would become QBE’s largest territory in terms of premium income, and it would become the world’s 15th-largest insurer, with annual premiums of more than $22 billion.
QBE derived a fifth of last year’s $12.4 billion gross earned premium from its Australian business. This would jump to 39% in the event the IAG board accepts an improved offer from QBE, according to Credit Suisse figures.
The combined entity would derive 29% of its premiums from Europe, 23% from the Americas and 9% from the wider Asia/Pacific region.
But analysts have also warned that IAG’s 900,000 “mum and dad” shareholders give Mr Strong unusual leverage in negotiations. While institutional investors are expected to favour a merger/takeover, the retail shareholders – a hangover from the demutualisation of NRMA Insurance in 2000 – are likely to take their lead from Mr Strong.