ASB Bank makes offer for Sovereign

ASB Bank has, as predicted, made a $235 million offer for financial services group Sovereign.

Thursday, October 8th 1998, 12:00AM

ASB Bank has, as predicted, made a $235 million offer for financial services group Sovereign.
The offer at $2.25 cash for each Sovereign share, places a value of $235 million on the business, however it is 7c less than yesterday's closing price.
The offer is being made by one of the bank's subsidiary companies, ASB Life Insurance, and it is open until early December.
Also, the offer is conditional on 90 per cent acceptance by shareholders, which means founders Ian Hendry and Chris Coon will have to sell their combined 22 per cent stake.

Some view the offer as a good opportunity for investors to quit the stock which has been a relatively poor performer since listing in April (see graph). This is especially so as other financial services companies, such as AMP, National Mutual and Colonial have fared well against a backdrop of plummeting market indices.
Since listing the stock has fallen as low as $1.42 and risen as high as $2.44. Yesterday it closed up 22c at $2.32.
ASB says the acquisition fits with its recent initiatives in the area of managed funds and retirement savings options.
However, others wonder what value Sovereign adds to ASB.
Sovereign is considered by many other life companies as more a distributor of products than a manufacturer, because of the way it reinsures its business. This is particularly so in the area of income protection and term life insurance.
Meanwhile, ASB has been successfully selling branded risk products produced by other companies.
It says, assuming the offer is successful, that Sovereign will operate as a stand-alone subsidiary and its management structure will be maintained, including the involvement of Hendry and Coon.
Commonwealth Bank of Australia (CBA) owns 75 per cent of ASB and the balance is owned by an Auckland-based community trust.

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