As if there isn’t already enough news from Switzerland, what with the Donny in Davos U-turn show. Look at this: Zurich trying to get in on the act, even if this time it’s the insurer, not the Alpine city.
On Monday, it brought a nice Swiss bear hug to Beazley, its smaller London-listed rival that’s big in all kinds of specialty insurance: cyber, political risk, weather catastrophes, terrorism. Fed up with hush-hush talks, the Zurich boss Mario Greco gave the Beazley board just ten minutes’ notice before going over their heads with a possible cash offer at £12.80 a share — a 56 per cent premium — valuing the UK insurer at £7.7 billion. Even better, Zurich let it be known that this was bid attempt No 5, having already been rebuffed three times in June.
And now? Well Beazley, chaired by Clive Bannister and led by chief executive Adrian Cox, has politely told the Swiss to yodel off, saying their mooted bid “materially undervalues” the group: news that produced a 0.6 per cent fall in the shares to £11.16 after Monday’s 42 per cent jump to a record high.
And, simply at a tactical level, you can see why. As Beazley pointed out, this proposal is less than the £13.15 Zurich dangled in June — and at a lower multiple, too, than the 2.4 times book value it proposed back then. What sort of Swiss M&A gambit is that? Short answer: one as cuckoo as their clocks.
Still, it wasn’t only Greco nickel and diming his mooted bid that irked the UK insurer. As Cox put it: “Beazley is a Premier League company and we’re being offered a price that’s akin to a Championship league club”. True, that analogy would work better if he didn’t support Crystal Palace: a Premier League outfit that recently proved it can succumb to a team five divisions below in National League North. All the same, you get his point.
Zurich’s justification for cutting June’s bid price is that, since then, Beazley has had too many days like Macclesfield away: lacklustre half-year figures in August and an update to go with November’s capital markets day that included an 8 per cent drop in cyber risk premiums as it cut back in the face of rising competition and rate cuts. Cox would admit, too, that the market has softened a bit since June.
• Beazley boss says Zurich bid undervalues a Premier League company
Even so, he’s right that insurance is a cyclical business and no one would sell a company on a short-term view. And not least a quality insurer like Beazley: a group that’s delivered a top-of-the-tree 15.5 per cent return on equity over the past ten years versus an average 10 per cent for its US speciality peers. To boot, Beazley’s specialisms are what Zurich’s after to “create a global leader” in such insurance with gross written premiums of $15 billion.
Indeed, you don’t have to be Cox to see why, in a world of heightened geopolitical risk, “all the excitement is in the specialty market” — even if he laughs away the question of whether Beazley’s “named perils cover” is mainly useful for insuring yourself against Donald Trump.
If Zurich wants Beazley’s prowess here, it’ll have to pay up — even if the two sides may not be wildly apart. Cox, who gets the strategic fit, said the price was “not insulting”, even if not enough, while Jefferies analysts spied “softening” in the rejection language: just “materially” undervaluing, not “significantly”. They also reckoned Zurich, with a market value of SwFr81 billion — £76 billion — could afford a bit extra “up to an additional 10 per cent”. Meantime, having canvassed 48 market investors, Autonomous analysts found that about two-thirds of them believed £13.30 would be enough for a “successful” offer.
So, Cox’s Premier League ball is back on Zurich’s side of the pitch. An M&A tip for the Swiss, too: it’s higher bids, not lower ones, that typically have most chance of hitting the back of the net.
Bidding war at Auction Technology Group
Apparently, Ben Brazil is a “former Macquarie Group investment banking superstar”. Or so says the Australian Financial Review. If so, he’s keeping it well hidden — at least to judge by the latest efforts of the firm he went on to co-found, FitzWalter Capital.
It bought a 22 per cent stake in Auction Technology Group — the home of online marketplaces — at an in-price of about 570p a share. Brazil then had the misfortune to see them slide Dutch auction-style to 270p. Sure, he’s trying to do something about it. First, badgering the group, led by chief executive John-Paul Savant, with 11 low-ball mooted bids — quite the onslaught given Brazil’s painful style, even if the directors have been as hopeless as he claims. And then dangling No12: a putative £491 million offer at 400p, at an ostensible 48 per cent premium.
His problem? While he’s had some success forcing the board to admit it toyed with selling its tractor department — the industrial & commercial auction wing — the market doesn’t believe he’ll deliver on his bid, as shares at 326½p imply. Why would it when he hasn’t even bothered to put the terms and conditions in writing? And, even then, other shareholders think it too low anyway. Yes, Brazil could yet propose a higher bid or turn activist and try to sack the board. But so far, it’s all rather lacking in stardust.
Banking on Davos
A Davos debanking double. First, the “disingenuous grifter” himself, Nigel Farage, reminding everyone why he doesn’t “like the banks very much”. And then an even bigger populist than him — Agent Orange — suing JP Morgan and its boss Jamie Dimon for $5 billion, alleging that due to its “woke” beliefs it wouldn’t bank him: a claim the lender denies.
What curious timing too. Surely nothing to do with Dimon warning on Wednesday that Trump’s plan to cap interest rates on credit cards would be an “economic disaster”?