qbe acquisition target? i hope so

http://www.smh.com.au/news/xchange/qbes-appetite-wont-be-quelled/2006/04/03/1143916464310.html

QBE's appetite won't be quelled

April 4, 2006

Some say the insurer can afford to put on weight - the competition regulator won't necessarily mind.
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QBE can breathe a sigh of relief.

Should it decide to make a takeover bid for either Insurance Australia Group or Promina, it will have no problems from the competition regulator.

Or that's what CommSec analyst Carlos Castillo reckons, anyway.

For a start, the Australian Competition and Consumer Commission has not opposed any of the six deals that have taken place in the insurance industry since 2001.

The regulator tends to let deals go ahead if two "safe harbours" remain - the merged entity shouldn't have more than 40 per cent market share and the top four players shouldn't have more than 75 per cent. But this is just a guideline.

CommSec reckons QBE could bid up to $6.57 for IAG, valuing it at $10.5 billion. The ACCC would scrutinise the bid because the merged group would have 39 per cent of motor insurance and 50 per cent of NSW's green slip market.

But its total market share would be only 31 per cent, so CommSec reckons the bid would be allowed because the industry is strongly competitive.

Even so, QBE is more likely to bid for Promina, CommSec says - at up to $6.84, valuing the company at $7 billion - because it is a smaller bite and fits better with QBE's strategy of targeting niche parts of the market.

QBE-Promina would have only 19 per cent of the market. But it could run into trouble in motor insurance and NSW green slips because the top four players would have more than 85 per cent of the market.

Both deals would mean QBE departing from its modus operandi of making small bolt-on acquisitions.

But it has been banging on about increasing its exposure to Australia.