Inchcape wins battle for Hogg Group with pounds 176m bid: Insurers will be merged to create world's seventh-largest insurance broker, which will be floated on London exchange

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The Independent Online
INCHCAPE, the international business services group, yesterday beat off its rival, Hongkong and Shanghai Banking Corporation, with an agreed pounds 176.6m takeover bid for Hogg Group, the insurance broker.

Inchcape intends to merge its own Bain Clarkson business, ranked 11th in the world, with Hogg, ranked 12th, to create the world's seventh-largest insurance broker. Within the next two years it also plans to float the newly combined company on the London Stock Exchange, where it could rank third in market capitalisation behind Sedgwick and Willis Corroon. Inchcape will retain majority control.

Terms of the offer are 255p in cash, compared with an opening price in the stock market of 234p, and Hogg shareholders will be entitled to keep Hogg's proposed final dividend of 2.5p. Hogg shares closed in line with the offer at 257p.

Morgan Stanley has advised Inchcape, whose traditional bankers are Barings, on the purchase. This is the first time that a US investment bank has acted as adviser on a UK bid by a company in the FT-SE 100.

Bid speculation has surrounded Hogg since HSBC Holdings revealed earlier this month that it had lifted its stake in the company from less than 3 per cent to 6 per cent, prompting a 24p rise in the shares to 165p. This followed confirmation from Hogg, which had issued a profits warning in January, that its pre- tax profits had fallen from pounds 13.4m to pounds 1.05m in 1993 and its dividend was to be cut from 8.15p to 5.65p.

Hogg subsequently announced that it had received several bid approaches, fuelling further speculation. Inchcape eventually outbid HSBC, which yesterday sold its 6 per cent holding to the Inchcape camp.

Anthony Howland Jackson, currently chairman and chief executive of Hogg and formerly managing director of Bain Clarkson, is to become chairman of the enlarged group.

Mr Howland Jackson said that the Inchcape offer was clearly best as it had made a higher offer but he was also delighted for commercial reasons that Inchcape had won.

'The combination will make us the number one broker in retail insurance in the UK. Bain Clarkson will bring in exposure to the Far East and South-east Asia while Hogg can contribute its US retail business and interests in Africa and the Caribbean.'

Inchcape made informal contact with Hogg last year and in the autumn made an abortive attempt to strike a deal with the insurance brokers CE Heath. Renewed interest was sparked by Hogg's January profits warning, which drove the share price down to 130p.

Inchcape shares closed 6p lower at 552p as analysts digested the price the company had paid and the effect on borrowings. But Andrew Cummins, strategy director, denied that Inchcape had paid too much.

'Multiples based on last year's profits at Hogg are almost meaningless - the company made pre-tax profits of pounds 30m to pounds 40m a few years ago. We are paying 1.35 times 1993 revenues compared with valuations in a range of 1 to 1.5 times for other quoted broking companies.'

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