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If anyone should know the importance of being a stickler for detail, it is insurance executives. But Zurich’s £8bn takeover bid for FTSE 100 specialist Beazley has produced some slippery arguments from both sides.
At the start of the week, Zurich’s approach looked like a classic “bear hug” — a public bid lobbed in at a high premium to push a recalcitrant target to the table. Chief executive Mario Greco said his prior, private approaches to Beazley had been rebuffed, so it was time to “have shareholders say what they think”. A mooted price of £12.80 per share — 56 per cent above Beazley’s undisturbed share price — looked generous; Beazley’s shares jumped and several analysts said the offer looked compelling.
Or maybe not so generous? On Thursday, Beazley said Zurich had offered a higher price of £13.15 last summer, and that the UK company had engaged “appropriately” at the time. The implication was that Greco is opportunistically taking advantage of Beazley’s 17 per cent share price fall since then.
Beazley may be pushing its luck. For all its emphasis on strong growth prospects and recent milestones, it’s not for nothing that its shares have slumped. The speciality insurance sector — particularly in cyber attacks, where Beazley is a leader — is entering what is expected to be a prolonged rough patch of falling prices, which will weigh on growth.
British boards have long been criticised for meekly rolling over when confronted with a half-decent bid, so Beazley can be commended for fighting its corner. There is a fine line between determination and truculence, but there are signs the companies may not actually be as far apart as their comments suggest.
For one thing, even Beazley chief Adrian Cox has acknowledged the industrial logic for a combination. Zurich would boost its market share in speciality insurance and get a foothold in the Lloyd’s of London marketplace, while Beazley could reach far more customers as part of a global giant.
Some analysts think Zurich can pay even more. Jefferies thinks it could afford to lift the current bid by as much as 10 per cent; Autonomous estimated it could go even higher. Beazley, meanwhile, has already tweaked its language to say Zurich’s most recent proposal is only a “material” undervaluation rather than a “significant” one; it might not take a huge increase from here to win over the board.
This is all, of course, the usual cut and thrust of M&A. But it’s curious to see emotions run high in an industry that specialises in applying a cold analytical approach to stressful events. They should be able to find a number that adds up for everybody.
