discount to deal, page-10

Well, Resourcefull,

As the SMH pointed out a couple of days ago (reproduced below for those who have neglected to read it), as Perpetual has sold out of Suncorp they figured that there would be NO bid made by Westpac and QBE for Suncorp.

But the brokers (such as UBS) who are always on the lookout for a free meal have been promoting that sh it on the grounds that the "synergies" would be less on the Promina deal rather than with a break up of Suncorp - they love "break ups".

Definition of broker: Parasitical organism that feeds off two hosts simultaneously. (also ref: Glorified and overpaid pim ps).

(Sir) Lunchalot
Scoffer Extraordinairre
Caveat: Lunchalot is poor and alcoholic so don't use his observations to trade.
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Perpetual cuts stake in Suncorp
October 17, 2006

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Suncorp makes $7.9b bid for Promina
Stephen Bartholomeusz: Suncorp plays a big opening hand
Insurers to nut out bid details
Elizabeth Knight: Bid means banks have to move fast
Tables may turn on Suncorp
FUND manager Perpetual has taken advantage of last week's spectacular share price rise in Suncorp to sell down its stake, suggesting it does not expect a bid for the bank-insurer.

The selling comes as investors await the release of a merger implementation agreement this week for Suncorp's proposed $7.9 billion takeover of Promina and amid continued questions about whether the deal will proceed.

Promina shares closed at $6.95 yesterday, well below the projected bid price, indicating markets do not think the deal will proceed.

Perpetual's head of Australian equities, John Sevior, said trading in Promina shares in recent days was "quite puzzling".

"There are no obvious reasons to suggest it won't be approved," he said. "I can only presume that any ACCC issues would have been contemplated by the Suncorp board and management before making the offer."

He described the bid price for Promina as "an attractive price in the short term".

The bid is priced at $1.80 cash and 0.2618 Suncorp shares, so the offer falls with any reduction in the value of Suncorp shares.

At yesterday's Suncorp closing price, the bid would be worth $7.62 per Promina share.

Mr Sevior described Perpetual's sell down as opportunistic given the spike in Suncorp's share price after the bid was announced.

Perpetual, which is no longer a substantial shareholder, previously held 5.1 per cent. Mr Sevior said the transactions last Thursday and Friday only reduced that by "a fraction", with some deals executed as high as $23.06, a substantial margin on yesterday's closing price of $22.23.

Perpetual is also the largest shareholder in Promina, with a 12.72 per cent share.

An analyst with Wilson HTM, Brett Le Mesurier, said the depressed Promina share price showed markets expected a fall in Suncorp's share price.

"I think that $22 already reflects some takeover premium," Mr Le Mesurier said, estimating the premium could be as much as 10 per cent of the share price.

The removal of the premium would see Suncorp shares fall to $20, more in line with a share price for Promina of $7 a share, Mr Le Mesurier noted.

Perpetual's Mr Sevoir said he could not guarantee the deal would proceed.

"I think there are still a lot of issues to be dealt with," he said. "So I don't think until the deal gets across the line can we say with any confidence."

UBS has undertaken analysis showing a split up of Suncorp by a bank and an insurer would produce greater synergies than a merger with Promina.

"A break-up of Suncorp by Westpac and QBE could deliver the largest combination of net profit after tax synergies totalling $228 million on our estimates, $190 million of this coming from the bank division and $38 million from insurance," UBS analyst Jeff Emmanuel said.

By comparison, a Promina-Suncorp merger would produce only $114 million.