BAT Urges Regulators to Scrutinize Takeover
Attorneys for BAT Industries, the London-based parent of Farmers Group in Los Angeles, urged state insurance regulators to scrutinize each stage of what they portray as a triple change in Farmers’ ownership if investor groups succeed in taking control of BAT.
The $13.4-billion bid for BAT Industries, made by an investor group headed by Sir James Goldsmith, calls for the immediate sale of Farmers to a French company, Axa Midi Assurances of Paris. But because state insurance commissioners must first rule on the suitability of any new owner, Goldsmith proposed placing Farmers in trust pending regulatory clearance. Doing so would enable his Hoylake Investments to complete the acquisition of BAT by Oct. 7, 60 days after the formal offer was mailed to shareholders, as required by British takeover rules.
Goldsmith maintains that the agreement between Hoylake and Axa Midi, which would pay $4.5 billion for Farmers, constitutes a single transfer of ownership. He also seeks to have the 60-day deadline suspended until state insurance commissioners can complete their hearings.
‘Only Sensible Way’
But in a letter delivered to California Insurance Commissioner Roxani Gillespie, BAT’s special counsel argued that three separate changes of ownership are involved. Each transfer--to Hoylake to the trust to Axa--requires independent inquiry, said the letter, submitted by the New York-based law firm of LeBoeuf, Lamb, Leiby & MacRae.
The letter added, however, that “the only sensible way” to handle the triple change “is to consolidate all of the proceedings into one” in each of the nine states in which Farmers insurance subsidiaries have headquarters.
The letter challenged the suitability of Axa Midi as a future parent of Farmers. It describes the French firm as “little known in the U.S. insurance industry” and having U.S. experience limited to a small Delaware reinsurer and a life insurer that it recently sold.
LeBoeuf Lamb’s chairman, Donald J. Greene, predicted in an interview that Hoylake’s offer would collapse under careful scrutiny. Greene accused the investors of changing strategy each time they are pressed for details and delaying the regulatory process.
In a letter to the same commissioners last week, Hoylake maintained that effective ownership would pass only from the newly acquired BAT Industries to Axa Midi by way of the interim trust.
Meanwhile, Hoylake disclosed that it holds 2.27% of BAT Industries, up from 1.48% in July when Hoylake launched its offensive. Hoylake also said that BAT shareholders have tendered only 0.03% of BAT shares and extended its offer until Sept. 15.
