CU silent on pounds 500m rights issue rumour

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The Independent Online
THE STOCK market was awash with rumours yesterday that Commercial Union would announce a pounds 500m cash call today and bring forward its half-year results due next week. The rights issue would help to finance the group's pounds 1.5bn acquisition of Groupe Victoire's insurance operations.

Paul Found, CU's group financial controller, said last night: 'We have nothing to add to our statement of 10 June . . . We hope to complete the transaction before the end of September, and hope that it would be financed by a combination of debt, equity and internal resources. Anything else at this stage is just speculation.'

Market sources suggested that CU would plump for a one-for-five rights issue at 475p, raising around pounds 500m. It will have to raise another pounds 500m in debt and the balance in cash to cover the Fr12.5bn (pounds 1.5bn) price tag for Victoire's life and general insurance arm.

CU's shares fell 7p in early dealings yesterday, although they closed 11p higher at 550p. The shares had lost 10p on Tuesday as French newspaper reports suggested that the rights would be announced on Wednesday.

Mr Found said that Compagnie de Suez, the French holding company that owns 89 per cent of Victoire, was selling Victoire's insurance operations to CU and would take up about pounds 70m of the rights, giving it 2 per cent of the British composite insurer.

There is a possibility that CU will end up paying less than the original Fr12.5bn price since it was to be based on Victoire's balance sheet value on 30 June. That month saw French share prices fall 6 per cent.