CU moves in on French insurer with pounds 1.5bn offer: Bid for Groupe Victoire is equivalent to half the market capitalisation of the British insurance giant

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The Independent Online
COMMERCIAL Union said yesterday it was offering Fr12.5bn (pounds 1.46bn) for Groupe Victoire, a large French insurer, in one of the biggest recent takeovers by a British company in Europe.

CU has been given the exclusive right to negotiate a deal with Victoire's owner, the French financial group Compagnie de Suez, which has been talking with potential purchasers for months. It is hoped to conclude negotiations by the end of September.

The much-rumoured deal, widely predicted in the markets on Thursday after the Italian insurance company Generali bowed out, will give CU a strong presence in France to add to its existing large subsidiary in the Netherlands.

Some analysts expected CU to make only a partial offer but the company bit the bullet and said it wanted to buy almost the whole business for a price equivalent to half its own market capitalisation of pounds 3bn. In stock market value, CU is already the biggest in Britain.

A third of the price will be raised by issuing new CU shares of pounds 500m and the rest will be from borrowings and internal resources. The company had pounds 256m of cash deposits at the end of last year.

Of the share issue, pounds 70m will go to Suez, which will keep it as an investment, and the French bank Societe Generale will double its long- term shareholding to 6 per cent. The balance will be raised from other investors but CU would not say whether it would be a rights issue or a placing. Before the deal goes through, Victoire's shareholders will take a special dividend of pounds 152m.

Groupe Victoire owns Abeille Vie, France's sixth-largest life insurer with a market share of 5 per cent, and Abeille Assurances, a general insurer which is the eleventh-largest in France with 3 per cent of the market. It also has a central Paris property portfolio.

John Carter, chief executive, said the French market offered good growth opportunities, especially in life and pensions, and the timing was also good.

Peter Ward, executive director, said the deal, if negotiations were successful, would take life assurance from 32 per cent of the group to 40 per cent. CU has a life assurance subsidiary in France, about a quarter the size of Victoire's.

He added that the French life market would continue to grow and there would also be opportunities to expand in the under-developed French pensions market.

Victoire's insurance business is mainly retail and spread through rural France. The French market had been depressed but premium rate increases are coming through strongly.

The company has run Delta Lloyd, a profitable Dutch insurer, since 1974, and does not expect problems in coping with a French company. There is likely to be a French chief executive for Victoire reporting to CU's corporate headquarters in the City.

CU said it expected its earnings per share to be diluted in the first year after the acquisition but the trend would then be upwards. Groupe Victoire's premium income last year was Fr15.8bn for life assurance and Fr7.7bn for general insurance compared with Fr13.8bn and Fr7.4bn the year before.

The net assets to be acquired are worth Fr9.5bn including Fr1.2bn for the life business.

A large part of the life business comes from Abeille Vie's association with a French savings and retirement organisation, Afer. The deal under negotiation includes a 50:50 split of Afer's new business with a company controlled by Suez, which is also keeping Victoire's reinsurance interests and Canadian operations.

The shares closed 5p down at 533p, though they had already weakened on Thursday.

(Photograph and graph omitted)

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