Shares fall as analysts cool on AXA takeover bid
France's AXA moved to buy Bermuda-based XL Group for $15.3bn (€12.4bn) yesterday to create what it said would be a world leader in property and casualty insurance.
Europe's second-biggest insurer offered $57.60 for each XL share, a 33pc premium to Friday's closing price, and said buying XL would result in property and casualty insurance rising to half of AXA's earnings, from 39pc.
XL has agreed to AXA's offer, and AXA, which ranks as Europe's second-biggest insurer in terms of market capitalisation behind Germany's Allianz, will look to de-list XL's shares. AXA said it would finance the deal with debt, cash and the proceeds of the IPO of its US business.
Insurers are turning to takeovers to strengthen their businesses as they face tougher regulation and falling returns from financial market investments. AXA's deal comes weeks after American International Group said it would buy reinsurer Validus for around $5.6bn.
P&C insurers' stocks fell during last year's natural disaster season and have attracted the attention of bidders as premiums are rising after several years of falling rates.
Allianz had also been seen as a possible suitor for XL, but a source close to the German company said Allianz was not overly concerned by AXA's move.
AXA's shares fell 6.9pc to 23.33 euros early yesterday, as some analysts said the deal looked pricey.
CEO Thomas Buberl said the deal will enable AXA to dominate the global property and casualty market, and reduce its exposure to the volatility of financial markets.
"We will be number one in commercial insurance," Buberl told a news conference in Paris.
Some analysts were sceptical about the price. "In our view, the acquisition of XL fits AXA's strategy of growing in commercial insurance. However, the purchase price looks quite high even after synergy effects and AXA's debt ratio is again rather stretched," said analysts at German brokerage Bankhaus Lampeile. (Reuters)