SYDNEY -- Suncorp (ASX: SUN.AX) is rumored to be considering a rival bid for ClearView Wealth (ASX: CVW.AX), according to reports in The Australian Financial Review.
Private equity firm Crescent Capital Management offered AU$0.50 in cash for each ClearView share in July 2012. At the time, the share price was AU$0.445. The company rejected that offer as being inadequate and timed to take advantage of volatile investment markets. ClearView's majority shareholder, Guinness Peat Group (ASX: GPG.AX) with a 47.8% holding, had also rejected the Crescent Capital offer on the basis that it was a substantial discount to the fair value of ClearView. Given that the company had AU$0.615 in net assets, including AU$59 million in surplus capital at the end of December 2011, the bid appears to be low.
Clearview specializes in providing financial advice; investment, superannuation, and retirement options; and life insurance -- all products Suncorp or its subsidiaries currently offer, suggesting that Clearview could be a good bolt-on acquisition for Suncorp.
Like its insurance peers, QBE Insurance and AMP, Suncorp was hit by a rash of natural disasters, low investment returns, and rising costs in fiscal year 2011. Earthquakes in New Zealand and Japan and widespread flooding in Queensland were just some of those disasters. Suncorp's loss estimate for the second New Zealand earthquake alone was AU$400 million.
All three companies are expected to report earnings in the next few weeks, with investors hoping their fortunes have turned around due to the lack of natural disasters and premium increases, which should offset rising costs. A report by reinsurance broker Guy Carpenter said catastrophe-related insured losses totaled $11 billion in the first six months of 2012, compared with $76 billion over the same period in 2011.
Investors appear to be hoping for a bidding war over ClearView, with the shares currently trading at $0.545 cents -- about 9% higher than Crescent Capital's offer price. The AFR article has suggested there could be several companies running the rule over ClearView. The sticking point is Guinness Peat. As the holder of 48% of ClearView, GPG can virtually dictate what the offer price will be for potential suitors.
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