ScotAm scorns `stop the clock' plea
Monday 03 February 1997
Abbey's call came after ScotAm executives, led by chairman Sandy Stewart, rejected the banking group's surprise pounds 1.4bn takeover offer, prompting speculation of a bidding scramble by rival suitors.
Printing and posting documents to its 1.1 million policy-holders could cost at least pounds 1.5m, Abbey said, and might have to be repeated several times if a contested bid battle developed. An Abbey spokesman said: "As far as we're concerned it's in the best interests of policyholders for ScotAm stop the clock and propose the best offer."
As pressure mounted on ScotAm's board last night, a mass of new names were being thrown into the ring as possible bidders. Prudential, the UK insurance giant and Allianz of Germany are now known to have made approaches, though at this stage they are thought to be tentative.
Other potential suitors include ING of the Netherlands, and Australia- based AMP, which already owns Pearl Assurance and London Life. AMP has talked of doubling its UK business over the next five years. Valuations of up to pounds 2bn have already been bandied about in connection with ScotAm.
ScotAm last night rubbished Abbey's request that work on the circular documents to policyholders outlining the demutualisation plans be put on hold. "It's hysteria. This is sheer lunacy," said a source. "They cannot seriously believe that a few hundred pounds is enough to persuade our policyholders to drop everything. This is a ploy by Abbey to destabilise our own proposals. We've yet to see a sensible offer from them."
Abbey responded furiously: "If we haven't put an offer to them then what on earth were directors rejecting last Thursday night when they vetoed our proposals?"
A key factor is likely to be whether three investment trusts investing in Scottish Amicable with-profits policies decide to press for a special meeting of rebel policyholders if directors refuse to enter into serious talks with Abbey or other bidders. One of the trusts, Scottish Value Management, has already said it wants to see full details of all rival proposals before taking a decision on ScotAm's plans.
Abbey National trumped ScotAm's own proposals to abandon mutual status in May and embark on a leisurely process towards floating in three to five years' time, rewarding policyholders with average bonuses of pounds 250, credited to the value of their policies. Abbey National has offered an average of pounds 360, payable upfront in cash or shares, and looks set to go higher if rivals come forward.
The terms and conditions offered to Scottish Amicable's executives and staff will also play a part. Abbey's policy when it floated in 1988 and again when it took over the N&P building society last year has been to delay the offer of options to executives for two years, but other bidders may be more generous. Scot Am's own proposals would share pounds 14m between the executives and a further pounds 20m among the 2,000 staff.
Corporate finance departments around the City are anticipating a race to bid for the dwindling band of mutual insurance companies, bringing a fee bonanza for firms who pick up lucrative contracts to advise bidders and defend the victims. Apart from Scottish Amicable, Scottish Life, Scottish Provident and Friends Provident are all potential targets, and demand could spill over into quoted insurance companies.
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