Lloyds insurer is still keen on Hardy
Beazley, the Lloyds of London insurer, remains keen to pursue its smaller peer, Hardy Underwriting, despite having a £155m cash offer for the group rejected.
Building up: Beazley has already had a £155m cash offer rejected
The offer for Hardy was made in writing to the Bermuda-based group on October 6, valuing it at a 36% premium to its closing share price on October 5.
The 300p a share offer was rejected for 'substantially undervaluing the company' on October 11.
'We are surprised and disappointed by the board's outright rejection of our approach, which represents an attractive proposal, at a significant premium, in cash,' Beazley chief executive Andrew Horton said.
'In these circumstances, we believe shareholders should have the opportunity to consider whether they would like their board to engage with us.'
Shore Capital's Eamonn Flanagan said Beazley is 'clearly attempting a “board bypass” and appealing directly to shareholders'.
Flanagan, who rates Beazley a 'hold' and Hardy a 'buy', believes Beazley will have to increase its offer if it wants the bid to succeed.
Observers said that Beazley, which insures more than a third of the world's top oil and gas companies, is very keen to conduct due diligence on Hardy, but needs a recommendation from the board to undertake this.
The insurer is believed to have secured the support of a number of institutional shareholders who hold shares in both companies.
Consolidation is rife in the insurance sector following the recent offer for Brit insurance by private equity groups Apollo and CVC, and RSA's interest in Aviva's general insurance business.
Predators are hoping to take advantage of cheap valuations and potential regulatory changes, according to Oriel Securities' analyst Thomas Dorner.
Hardy's current low valuation has been hit by large catastrophe claims linked to the earthquake in Chile and the Australian hailstorms in the first quarter of the year.
Observers, including Finncap's Charles Coyne, say the two companies are complimentary but points out that Hardy's 270p net asset value for 2010 should be the reference point.
Shares in Beazley rose 3.50p to 118p while Hardy shares jumped 46p to 290p.
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