GRE faces revolt on French deal

News Analysis: AXA has claimed victory in the battle for the British insurer after its pounds 3.4bn bid was agreed. But some shareholders believe a better offer was available

A SHAREHOLDER revolt was threatened last night after AXA, the French insurance giant, claimed victory in the battle for the British insurer Guardian Royal Exchange with a pounds 3.4bn agreed bid.

As AXA was toasting the endorsement of GRE's board for its 389p-a-share cash-and-paper offer, some shareholders questioned whether the deal represented the best offer, given that another group, Eureko, had tabled what seemed a more attractive deal.

Under the AXA offer, each GRE share will be worth 249p in cash and 0.243 new shares in Sun Life & Provincial Holdings, the London-listed company which is majority-owned by AXA.

GRE's board, already under fire for the way it has handled the three- month auction, ran into immediate criticism from shareholders, who believed better offers were available. The market too, appeared to shy away from the deal, pricing GRE's shares at 360p.

"If the board have recommended an offer from AXA when there is a higher offer on the table, then we need to know why," said one institutional shareholder, who declined to be named. "The fact that GRE's share price has fallen to 360p says it all."

Another said: "The situation is not yet closed. It is still open for Eureko to come back with a firm offer."

According to sources close to the deal, AXA's bid of 389p was chosen over the rival Royal and SunAlliance bid because the latter was unable to offer a full cash alternative and some shareholders were unwilling to take its paper.

Part of the reason was that shareholders had become tired of waiting for things to turn up at GRE - particularly after results like yesterday's, which showed a plunge in profits from pounds 872m in 1997 to pounds 292m. They wanted a cash exit.

According to the sources, Eureko, which has had trouble all along surmounting the credibility barrier, had made an indicative 385p a share cash offer but wanted to make a formal offer conditional on getting full access to the books. Directors decided instead to plump for the firm no-strings- attached offer from AXA.

GRE's board and its advisers, Morgan Stanley, feel they have done well to get this much for a company which, before the auction began last November, was judged by the market to be worth barely pounds 3 a share.

Nevertheless, some shareholders believe they have a gripe. While the AXA/Sun Life offer valued the GRE shares at 389p when the markets opened yesterday morning, by late afternoon the Sun Life shares had come off 10 per cent.

Because of the paper element, the value of the AXA offer was closer to 378p.

Yesterday there was still a possibility that Eureko might come back with a hard cash offer, something which would please the discontented shareholders. However, Schroders, the biggest shareholder, is in favour of the AXA deal.

"The auction has been conducted fairly," said Schroders' Jim Cox. "You have to remember that this is a business with employees and customers and there is a limit to how long the uncertainty can go on."

John Robins, GRE's chief executive, yesterday declined to answer questions on the deal, which will see him leave the group over a year ahead of his February 2001 retirement date.

Mr Robins appeared opposed to a deal as recently as last summer, arguing that GRE had a good future as an independent group focusing on protection insurances such as health insurance and critical illness.

Mark Wood, chief executive of Sun Life & Provincial, yesterday said he expected job losses "in the hundreds, not the thousands" from a combined UK staff of around 17,000.

Savings of around pounds 50m would come from cutting head office costs, closing duplicated branches and slashing corporate expenses.

The deal represents a victory for AXA and spells humiliation for two rival bidders, the British competitor Royal & SunAlliance and Eureko, the consortium of nine European insurers which includes Friends Provident.

Sun Life & Provincial holding company will only keep the UK and Ireland operations, worth pounds 1.88bn.

It has already arranged to sell GRE's US property and casualty companies to Liberty Mutual, a US insurer, for pounds 888m.

GRE's German business, GRE Albingia, will be sold to AXA's German division, AXA Colonia, for a further pounds 588m. Some of the proceeds of the sale will be used to pay off nearly pounds 300m in foreign-denominated debt.

If the deal is approved by shareholders, it will mark another giant leap in the French group's ambition to beat rivals such as Allianz, Aegon and Generali as Europe's dominant insurer.

The deal will make AXA the third largest general insurer in the UK, behind CGU and Royal & SunAlliance, boosting the amount it attracts in general insurance premiums from pounds 500m to pounds 1.7bn.

It will hold the number two position in private health insurance - through Guardian's ownership of PPP - and the number three position in UK life insurance. AXA, already one of the world's biggest investment managers, will also have pounds 55bn to manage in the UK alone.

The BIFU finance union yesterday welcomed the deal, citing assurances from AXA that the job losses would be in the hundreds. Had Royal & SunAlliance won out, the union feared up to 5,000 job losses.

But for customers, yesterday's deal may not prove as welcome.

Andy Homer, the future chief executive of AXA's general insurance arm, yesterday indicated that the group would soon start to raise motor insurance premiums in an effort to improve profits at the business.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory
Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

Cook not the only one to be caught in The Oval mindwarp

Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

Can Benitez get the best out of Bale?

Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

Beijing witnesses new stage in the Jess and Kat rivalry

The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

Jeremy Corbyn interview: A shrewd operator desperate for power

His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

Isis executes Palmyra antiquities chief

Robert Fisk on the defender of the ancient city's past who was killed for protecting its future