Conseco, a life insurance holding company based in the US Midwest, surprised Wall Street with a dollars 67-a-share offer for the big asset- management firm, topping GE Capital's dollars 60 bid, first proposed in March. Conseco gave Kemper until Sunday to decide on the cash- and-share package, bringing pressure on GE Capital to raise its all- cash bid before the weekend.
Kemper management has resisted the GE offer, which is to be voted on by shareholders at its annual meeting on 22 August. GE Capital has been biding its time since raising its initial dollars 55-a-share bid for Kemper, but analysts said GE Capital would have to come back with dollars 66 a share in cash to top the Conseco package.
The bid is ambitious for Conseco, an Indiana holding company that has taken control of 11 small life insurers in the past decade through acquisition partnerships similar to one assembled for this bid. Kemper has a large life insurance business, but GE Capital's interest has focused on the dollars 70bn in assets it has under management.
Kemper also has an under- performing broker-dealer operation that many analysts assume GE Capital would eventually merge with Kidder Peabody.
Conseco has said it wants to lift the percentage of business from fee-based services. Analysts say that while Kemper is Conseco's biggest target to date, its management has a good track record in managing this sort of business.
Conseco's financing for the bid has been arranged by Citicorp and Morgan Stanley, which has provided a letter saying it is 'highly confident' it can raise dollars 750m in subordinated debt for the offer.
GE Capital, on the other hand, can easily pay cash for Kemper.
'This all depends on how much GE Capital is willing to pay,' said Michael Lewis, an analyst with Dean Witter Discover in New York. 'If they want Kemper badly enough, it's theirs.'
Kemper shares traded up sharply on the Conseco announcement, rising 43 4 to dollars 64.Reuse content