Aegon has been open about wanting to make further acquisitions in the UK life sector but was initially reluctant to make an approach because of the steep price NatWest was already offering for the group. However, bankers say that Aegon is looking again at a bid because of the fall in the NatWest share price.
Aegon, which owns Scottish Equitable, the Edinburgh-based fund management group, and is buying the former GRE life business from Axa for pounds 750m, would be reluctant to get embroiled in a hostile bid. But that would change if there was pressure on L&G to open up the bidding.
Bankers said that if the NatWest share price remainsweak David Prosser, the L&G chief executive, would have to consider an offer from a foreign bidder which offered the certainty of 210p in cash, or higher rated paper, particularly if, as suggested yesterday, the board is far from convinced about the merits of the NatWest deal.
Aegon would have to persuade Mr Prosser that it could offer him a role comparable to the deputy chairman's job he is being offered by NatWest. The group would also have to pursuade UK institutions to accept Aegon shares in return for L&G, although bankers insisted this was not as big an obstacle as previously thought. Although the City accepts the strategic logic of the deal it fears NatWest will struggle to make the deal pay.
Following an initial 5 per cent fall in the NatWest share price prior to the deal being announced on 6 September, NatWest agreed to put in place an exchange mechanism that supposedly guaranteed L&G shareholders the equivalent of 210p a share in cash and shares. But the share price has continued to fall and has dropped below the 1,140p floor beyond which NatWest refused to guarantee the value of its offer any further.
As of yesterday NatWest was at 1,037p, nearly 10 per cent below the price when news of the deal broke. At that level, L&G shareholders face the prospect of the offer sold to them at 210p turning out to be worth 192p - 8.5 per cent less. L&G shares have fallen in sympathy. L&G traded at 189.25p, down 1.75p yesterday, suggesting a lack of confidence in the NatWest deal's prospects. NatWest shareholders vote on the deal on 6 October.
Outlook, page 21