Insurance Australia Group shareholders have until Thursday to apply for
shares under the $380 million share purchase plan which is helping to fund last
month's $1.86 billion acquisition of CGU/NZI.
IAG chief executive Michael Hawker would not comment on the level of interest
yesterday but said that IAG expected applications to ramp up in the final week.
He said that given where the share price closed yesterday, investors would be
buying into the deal at its net tangible asset value.
``The share price where it is today it has priced the deal at its net
tangible assets. It's eliminated the goodwill in the transaction," he said.
Retail shareholders will pay the lower of $2.55 and a 5 per cent discount to
the average trading price in the 10 days after the offer closes.
IAG shares have been under pressure as investors have complained that IAG
paid too much for CGU, despite not facing any competition from rival bidders.
IAG shares closed steady at $2.51, a big fall on the trading price of around
$3 at the time the deal was announced.
The company will announce the allocations next week while the final price for
the shareholder purchase plan will be revealed on December 9.
Shareholders can invest up to $5000 without any transaction costs. At an
average subscription rate of $2500, IAG would require about 150,000 of its
1.1million shareholders to support the offer.
Godfrey Pembroke's head of broking investment services, Cavil Singh, said he
was recommending existing investors put more money into IAG and valued the stock
at around $3.10.
``It is a quality investment even though we all recognise they may have paid
a full value or they did not pay for these assets at a market price," Mr Singh
He said IAG was less volatile than other insurance stocks because of its
greater reliance on household insurance and was trading at a price/earnings
discount to the overall market.