THE Australian insurance giant, AMP, is lining up a takeover bid for Norwich Union shortly after the British insurance group is floated next month, according to reports from the UK.
The report, in Saturday's Times, would undoubtedly fuel interest in the Norwich Union flotation - the company will have around 150,000 Irish shareholders after the flotation and these would be among the beneficiaries of any takeover bid from AMP. There was no response from either AMP or Norwich Union to the weekend reports.
The Australian group has previously failed in a bid for Scottish Amicable but has made it clear that a major presence in the British insurance market is a prime element in its strategy. Norwich Union is expected to be valued at around £5 billion but any takeover bid after the flotation would undoubtedly have to be pitched at a substantial premium - possibly as high as 25 per cent - over the market price.
Market sources believe that AMP is unlikely to be the only international group bidding for Norwich Union post flotation, and that any initial bid from AMP might flush out other bidders.
Norwich Union's 2.9 million qualifying members, including the 150,000 in Ireland, are to be told on May 21st exactly how many free shares they will receive in the flotation and also the discount to the flotation price at which they can apply for additional shares. Those getting free shares can apply for a minimum of £400 and a maximum of £100,000 worth of additional shares at the discounted price.
Investors with profits investment policies will receive 300 free shares plus an as yet an unspecified additional number of free shares related to the size of their investment. The exact number of additional shares will also be made known to each investor in the miniprospectus that will be issued to shareholders on May 21st.
Investors with nonprofit policies such as mortgage protection will get a flat 150 free shares. Both categories of policyholder can however, apply for additional shares at the discounted price.
Given the rise in British financial shares since Norwich Union indicated a range of between 220p and 265p for the flotation it seems likely that the shares will be floated at close to that upper level of 265p. That would mean that the with profits policyholders would get free shares worth almost £800 and the non profits policy holders free shares worth nearly £400.
Norwich Union's Irish management has already suggested that Irish shareholders will receive around £170 million worth of free shares.
Norwich Union will have more Irish shareholders than any Irish company when it becomes a public company and its shares begin trading on June 16th. It will have even more Irish shareholders than Irish Permanent, which has around 130,000 shareholders when it floated two and a half years ago and now has around 100,000 shareholders.
Given the speculation on a take over bid and the fact that most institutional shareholders would be short of Norwich Union shares after the flotation, most analysts expect the shares to trade strongly when they finally reach the market on June 16th.
The opening price is likely to be supported by the overall strength of the market in financial shares, the shortage of supply for institutional investors and the prospects of a bid. "I think investors with free shares might be well advised to buy more shares at the discount price if they can afford it," said one Irish investment adviser.
Most of those with Norwich Union policies have by now claimed their allocation of free shares - Norwich Union also has a helpline for Irish policyholders at 1850-334444.
Between now and the flotation date, Norwich Union will be posting over 1,000 tonnes of paper to the 2.9 million policyholders on its mailing list.
