QBE’s strategy in its $7.43 billion cash and scrip play for IAG has divided the market, with the timing and substance of last week’s restated proposal leaving many analysts and media commentators perplexed.

But QBE CEO Frank O’Halloran will be hoping today’s profit warning from IAG will help QBE’s offer gain traction with shareholders.

Last week QBE extended its offer of 0.142 QBE shares and 70c for each IAG share to next Monday. But Credit Suisse analyst Arjan van Veen says IAG shareholders are unlikely to find QBE’s proposed scheme of arrangement compelling.

“Our evaluation is that it’s not a great offer and $4.50 would be a more realistic price,” he told insuranceNEWS.com.au. “IAG shareholders are effectively getting a nil premium offer with no benefits from the synergies.

“We concur with [IAG Chairman] James Strong that shareholders would be swapping one business with rates going up for one at the top of the cycle.

“The timing of the offer means there will be a takeover premium built into the IAG share price from now on.”

Since QBE made the offer public on April 15, its share price has been comprehensively outperformed by IAG. QBE’s shares are up 6%, while IAG stock has lifted 13%.

But Merrill Lynch analyst Andrew Kearnan believes the underlying value of the deal could be worth as much as $4.75 a share due to a combination of synergies, diversification benefits, enhanced market structure and a resolution of IAG’s capital problems.