suncorp promina ready to sign deal

October 16, 2006 12:00am

SUNCORP chief John Mulcahy and Promina boss Michael Wilkins met over the weekend in an attempt to finalise a formal $8 billion deal by mid-week, as speculation intensifies a major bank may have a tilt at Suncorp.

It is understood the two chiefs met throughout the weekend and are aiming to have a merger information agreement in place and due diligence signed off by as soon as tomorrow.

Suncorp and Promina were forced to announce their two-week discussions last Thursday after news of the proposal leaked to the market and sent Promina shares soaring 6 per cent on Wednesday.

The Australian Securities and Investments Commission is believed to be scrutinising the level of disclosure surrounding the deal.

A number of December call options on Promina stock were understood to have been bought ahead of last Thursday's announcement, sparking speculation that someone might have accumulated a stake.

The Australian Stock Exchange may also further query Promina and question Suncorp over separate speculation that a bank -- possibly Westpac, St George or HBOS -- is considering a tilt at the Brisbane-based banking and insurance combine.

Suncorp shares jumped 38c on Friday as investors punted on the prospect of a takeover bid. The share price movement is unusual because shares in bidders usually fall and the target company's shares rise in line with the bid. But Promina shares fell on Friday, suggesting investors have some doubts the deal will be completed in the form announced last week.

Suncorp is offering 0.2618 of its shares and $1.80 cash per Promina share, impliedly valuing Promina at $7.65 on Friday's closing price of $6.92. Suncorp closed Friday at $22.38, up 18c.

A Westpac/QBE Insurance joint bid at Suncorp is also considered a possibility, with Westpac taking the banking business to improve its footprint in Queensland and QBE taking the insurance business to bulk up domestic operations which have been dwarfed by the dramatic expansion of its international business.

Rivals QBE, Wesfarmers, Allianz and a North American company are also believed to be having a hard look at Promina.

Market speculation surfaced late last week that QBE might be looking at rival Insurance Australia Group.

Due diligence discussion between Promina and Suncorp is believed to be proceeding well.

Most analysts believe that the Australian Competition and Consumer Commission will look at the deal closely but let the takeover proceed.

The ACCC might seek some conditions such as the divestment of Promina's compulsory third-party insurance business in Queensland.

Promina's share of the CTP market in Queensland is about 5 per cent, which would take Suncorp's total share to about 75 per cent.

One analyst said Suncorp might seek to change the ownership structure of some its joint-venture arrangements in Queensland.

Another analyst said the NSW motor insurance market would also come under scrutiny for the ACCC but given that the enlarged business would have a share of under 40 per cent, it was unlikely to be an issue.