Rumour mill heats up as Allianz eyes blockbuster acquisitions

John Neal, QBE

QBE has denied speculation it is in takeover talks with German giant, Allianz.

In a statement to the Australian Stock Exchange, QBE was emphatic that no conversations relating to selling the business had taken place, following media reports of an offer valuing Australia’s largest insurer at A$20bn.

“While it is QBE’s policy not to comment on rumour or media speculation, QBE confirms that it is not in discussions with Allianz or any other potential buyer,” it said.

Handelsblatt first reported that Allianz chief Oliver Baete had met with QBE boss John Neal (pictured) in December, and made a preliminary offer valuing the company A$15 a share – a premium of 20% on the company’s current value.

QBE’s stock jumped more than 5% on the news, almost touching A$13 during Monday trading, before retracing gains after QBE moved to the quash the rumours.

It rose 1.2%on Tuesday. The stock has risen 25% in the past three months, which could suggest the window for mounting a decisive bid has already passed, a situation further clouded by Australian insurers trading at larger multiples than their European counterparts.

“Participation in industry consolidation is not a part of [our] strategy and there is no basis to speculation either that this strategy is under review or that QBE has received a corporate proposal,” QBE added in a separate statement.

Allianz CFO Dieter Wemmer told analysts in November that the company had about £2.15bn available for acquisitions before year-end, after which the funds would be returned to shareholders. The company has already been linked with an acquisition of parts of Italy’s largest insurer, Generali, precipitating an official takeover approach from Italian bank, Intesa last week.

An analyst’s report from Jeffries’ Mark Cathcart noted Allianz has a further £2.5-3.5bn of unutilised leverage, giving them a war chest in the £5-6bn range.

This is scarcely half the reported QBE bid – a figure some analysts have already dismissed as insufficient due to value-enhancing restructuring at the company, initiated after its first half profits plummeted 46% year on year.

According to Andrew Adams at Credit Suisse, a typical take-out price would be around three times net tangible assets, which would value QBE at more than £15bn, or A$19.60 a share. Adams concluded that QBE “remained in its ‘turnaround’ phase” adding there “remain much cheaper companies out there where business loss risk is a lot lower.”

Allianz is no stranger to blockbuster deals, having paid £14.4bn to acquire Dredsner bank in 2001. A deal for QBE would make them the largest insurer by both premium and market capitalisation in Europe.

In 2015, the company embarked on a three-year plan to achieve annual earnings per share growth averaging 5% from 2016 to 2018, and a 13% return on equity by 2018.