Batus Raises Its Bid for Farmers to $72 a Share
Batus Inc., mounting a new offensive in its long-running battle to take over Farmers Group, has conditionally offered to increase its bid for the Los Angeles insurance holding company to $5 billion, or $72 a share.
A letter from Batus released by Farmers on Tuesday evening stated that the new offer--up from the previous bid of $4.35 billion, or $63 a share--would be withdrawn if the companies do not reach a definitive merger agreement by Aug. 19.
“The board of directors will give this new offer careful consideration,” Farmers Chairman and Chief Executive Leo E. Denlea Jr. said in a prepared statement.
Batus, the U.S. arm of London-based tobacco conglomerate BAT Industries, initially proposed on Jan. 13 to pay $60 a share. On March 3, it issued a tender offer to buy all of Farmers’ 70 million outstanding shares for $63 apiece. Batus has not amended the tender offer, and it will remain at $63 if the new proposal expires or is rejected by Farmers, Batus spokesman Wilson W. Wyatt said.
Second-Biggest Deal
Farmers has quickly rejected the previous bids and is fighting Batus before nine state insurance regulatory agencies that must approve the deal if the insurance company is to be acquired intact.
If the new acquisition offer succeeds, the deal will be the second-biggest takeover ever of a California company, just behind General Motors’ $5.1-billion purchase in 1985 of Hughes Aircraft in Los Angeles.
Some analysts and takeover speculators have criticized Batus’ unwillingness to raise its offer until now, and had predicted that it would take an offer of as much as $80 a share to win the aid of Farmers management in seeking state regulatory approvals.
Batus and its investment bankers, Goldman, Sachs & Co., “have to make this deal friendly because it’s like driving on an oil slick road trying to get through the states,” the managing director of a takeover speculation firm said in a recent interview.
So far, Ohio and Arizona have approved the deal while Idaho, Oregon and Washington have disapproved it. The California Insurance Department also turned down the deal, but its ruling was overturned on Friday by a Los Angeles Superior Court judge. All decisions to date are in various stages of appeal by the losing parties.
Farmers noted in its statement Tuesday that Idaho, Oregon and Washington “have rejected the transaction on a broad range of issues wholly unrelated to the price being offered by Batus.”
Repeated delays are running up the deal’s costs for both sides. Farmers spent $6.9 million in the second quarter fighting off its unwanted suitor. BAT Industries recently indicated that its legal fees alone could eventually reach $70 million.
