AXA's pounds 3.5bn bid is accepted by GRE

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The Independent Online
THE insurance group Guardian Royal Exchange was poised to announced today that it has accepted a pounds 3.5bn takeover bid from AXA, the French insurer, putting an end to a messy three-month auction for the group.

The board of GRE met last night to agree the details of the bid ahead of a formal Stock Exchange announcement today.

The deal is a triumph for AXA, which - as revealed in The Independent - sparked an auction for the group, the smallest British composite insurer, when it approached GRE about a friendly deal last November.

The offer submitted late on Friday consists of a cash and shares offer worth 390p a share. It is being launched through Sun Life and Provincial, the UK quoted group majority controlled by AXA.

As a result of the offer and depending on how many GRE shareholders accept the Sun Life paper, AXA's stake is expected to fall from above 70 per cent in Sun Life to around 60 per cent in the combinedgroup. AXA has agreed to sell on GRE's American businesses to the US group Liberty Mutual, while AXA's German offshoot Colonia has agreed to buy Albingia GRE's German business. The combined sales are expected to raise pounds 1.5bn of the pounds 3.5bn cost of the takeover. The rest is expected to be financed by a convertible bond issue by AXA.

The deal is a blow to Eureko, the umbrella grouping of nine European insurers which until AXA came back with its knock-out bid had been in the lead. This is the second time that Eureko has been the loser in an auction for a major insurance deal in a year. The group, which was advised by the American bank Chase Manhattan, narrowly lost out in the bidding for GAN, the French insurer, last year.

Eureko has offered a key role to GRE's chief executive in waiting Peter Owens, and had been planning to re-float the group in three years' time.

But the real loser is Royal and Sun Alliance who, say insiders, were desperate to block AXA, which as a result of this deal will move into third place in the British insurance industry ahead of Allied Zurich and Legal and General. However, RSA shareholders had been reluctant to approve the full cash alternative that the GRE board were seeking on behalf of institutions. The value of RSA's offer was being undermined as last week wore on by the fall in the value of its shares.

It is understood that the Sun Life management believe to make pounds 50m savings a year as a result of the deal but will be able to get by with several hundred job losses as opposed to the 5,000 that the Royal Sun Alliance deal would have cut.

Peter Owens, who joined GRE when it acquired healthcare group PPP last year, is expected to be offered a senior role as is Sir Colin Chandler, who has just taken over as GRE chairman, while John Robins, group chief executive, will retire.