GRE seeking pounds 3.5bn takeover options

SHARES IN Guardian Royal Exchange, the fifth largest UK insurer, soared 42.5p to 350p yesterday after the group confirmed it was looking at a number of options which "may or may not lead to an offer for the company".

Shareholders said last night that to have a chance of succeeding any offer would have to be pitched at more than pounds 4, valuing the company at over pounds 3.5bn. "At that level there will be some premium to net asset value," said one investor last night.

Axa, the French insurance giant, has already made an informal approach to GRE serious enough to have been discussed at board level. Claude Bebear, the Axa chairman, has been talking over the past few days about the opportunities created for expansion by the recent share price falls.

He is sounding out advisers in readiness for a more formal bid for GRE including Warburg Dillon Reed, the investment bank. Warburg acts as broker to Sun Life & Provincial Holdings, Axa's quoted UK offshoot, which is believed to be the preferred vehicle for the bid.

Last week's the Independent reported that Axa was considering a bid. It emerged over the weekend that GRE had appointed Morgan Stanley, the US investment bank, to examine a number of alternatives.

GRE believes that there are a number of other insurance groups who may be prepared to make a bid.

Morgan Stanley is also looking at whether it would make sense to solicit offers for parts of the business.

Analysts said that Allianz of Germany and AIG, the US insurer, may be interested in expanding into the UK. However, they were dismissive of other bidders touted over the weekend.

Norwich Union, which is also big in healthcare insurance, could face competition problems because of GRE's recent acquisition of PPP, the healthcare insurer.

AGF, the French insurer that was recently privatised, has also been mentioned.

However, the firm is running down its UK operations and thought unlikely to want to get involved in a contested situation, particularly one which could get messy.

"It looks like Axa is very much in the lead. It must do a deal if it wants to get into the top three," said Matthew Wright, an insurance analyst at Daiwa.