The unification dividend

12 Sep 2005

The E6bn buyout of the Ras minorities in Italy will not only simplify the group. It is being used as an excuse to form a European company. Employees will still sit on the board. But the structure will be more streamlined. This is a powerful symbol ahead of the German election.

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Allianz, the German insurance group, is proposing to buy out minority investors in Ras, the Italian insurer, and simplify its governance structure.

Ras investors are being offered Allianz shares, with a cash alternative, valuing the business at a 15% premium to its average share price over the last three months. Allianz currently owns 55% of Ras. The total value of the transaction is E5.7bn.

Under the share offer, Ras shareholders will receive between 0.153 and 0.161 Allianz shares for each of their shares. Under the cash tender offer, Ras shareholders would receive E19 per share.

The transaction is being financed through the issuance of about E2bn of equity, E1.5bn of hybrid debt, E1bn of senior debt and E1.2bn of existing financial resources.

Allianz will also become a European company. This will enable it to cut the number of members of its supervisory board to 12 from 20.

Codetermination – whereby employees are represented at board level – is to continue. The management and supervisory boards will have a higher proportion of European, as distinct from German, members, Allianz said.

The transaction will strengthen Allianz's capital base and be earnings accretive even before considering synergies arising from greater efficiency.

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