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1999
Amp Bid Is `best You'll Get', Experts
Sydney Morning Herald
Thursday September 30, 1999
AMP's $830 million bid to move to 100 per cent ownership of GIO is likely to face little opposition, with insurance analysts unanimously recommending minority shareholders accept the deal.
The analysts have described the deal as ``generous", saying shareholders would be foolhardy to reject it because that would force AMP to undertake a rights issue which would push GIO shares below $2.50.
Most analysts believe GIO is worth between $2.40 and $2.60 a share, given the losses in GIO Re and the general downturn in the insurance sector.
This means AMP's offer of $3.05 a share in tradable notes plus two cash payments, which are dependant on profits in GIO Re, represents a premium of about 27 per cent above fair value.
GIO shares closed yesterday at $2.91, up 1c.
Several analysts are also recommending the deal to their clients on the basis that the yield on the notes at least 7 per cent in the first year will replace the lost yield on GIO shares.
``This will be the best offer that GIO minority shareholders are likely to receive," Ord Minnett analyst Mr Shane Fitzgerald said in a note to clients. ``The consideration being paid appears to be reasonable given the current outlook for the group."
Brokers Warburg Dillon Read says: ``We believe the scheme to be favourable to the minority shareholders of GIO as it values GIO scrip at a premium to our fundamental valuation.
``It protects GIO shareholders from downside associated with potential damage to the GIO brand name from pending legal action."
To succeed, the mop-up bid will require approval from 50 per cent of the 68,000 minority shareholders by number and 75 per cent by number of shares.
If the deal is approved, AMP will move to 100 per cent ownership and it will then be able to fold GIO into its own business, generating cost savings of about $140 million a year.
AMP, which owns 57 per cent of GIO, has been forced to seek to buy out the minority shareholders because the independent directors on GIO's board blocked its strategic alliance proposals, saying they were not in the minority shareholders' interests.
© 1999 Sydney Morning Herald