Qbe Decides To Postpone $1b Offer For British Insurer

The Age

Thursday August 5, 1999

JILL FERGUSON

QBE Insurance yesterday decided to delay its potential $1billion approach to the British-based insurer Limit, resolving to wait until a proper due diligence could be performed.

QBE's chief executive, Mr Frank O'Halloran, said the Limit project, after a year in the making, had ``gone into the bottom right-hand draw".

``We'll just sit back and wait and see - QBE has 20 acquisitions on the go at the moment," he said.

Limit is a listed company, which effectively controls two of the Lloyds market's best-performing underwriting agencies. With shareholders funds of about 475million ($A1187 million), Limit is a large player in the Lloyds market, with 7.5 per cent market share.

After making an initial approach two weeks ago, QBE found itself on the receiving end of a blunt message from Limit's board.

In a notice to the London stock exchange, Limit's chairman, Mr Jonathon Agnew, said QBE's approach ``would bring no advantages to Limit's business and the potential offer was at a price level which is clearly unacceptable".

He also said Limit's business prospects were on the rise, and indicated management would seriously resent any loss of independence.

While Mr O'Halloran said he gave Limit an indicative bid price of a 25 per cent to 30 per cent premium on the group's 1.48 share price - the going rate for such companies - a formal offer would not have been made until QBE completed a preliminary due diligence.

Both QBE's chief executive and chief financial officer hit the phones yesterday, assuring major institutional shareholders that the acquisition had been within QBE's valuation parameters.

Since QBE has generally avoided listed companies and hostile takeovers and likes to buy companies at net asset value, analysts were surprised by the insurer's interest in the British syndicate.

``QBE buys insurance portfolios and parts of businesses - this marks a huge change in strategy for the group," one analyst said. ``The sheer size of Limit is a quantum above what the company has ever been interested in."

But Mr O'Halloran said QBE had explored similar-sized acquisitions in the past, but had not previously found a company that fitted QBE's profile.

He admitted QBE was looking at a rights issue to fund the now-defunct $1billion acquisition and, with the help of Merrill Lynch, was considering a hybrid security issue.

© 1999 The Age

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