Goldsmith Granted a Year to Win States’ Approvals for BAT Industries Takeover
Sir James Goldsmith on Friday won a crucial battle--for a year’s breathing spell--in his $21.5-billion bid to take over BAT Industries, parent of Farmers Group, the Los Angeles-based insurance holding company.
The British Panel on Takeovers and Mergers gave Hoylake Investments, the vehicle Goldsmith organized for pursuing London-based BAT, up to a year to secure necessary approvals from insurance regulators in the nine states, including California, in which Farmers subsidiaries are headquartered. If successful, Hoylake would then have 21 days to renew its bid, which is second in size only to last year’s $25-billion leveraged buyout of RJR Nabisco.
BAT said it will appeal the British panel’s decision, which waived a rule that would have forced Hoylake to wait a year after the current offer expired Oct. 7 before renewing the bid. Without Friday’s ruling, Hoylake’s bid would likely have been doomed.
Approvals of state regulators could come within three months, predicted top executives of Axa Midi Assurance, the French insurance holding company that has agreed to buy Farmers from Hoylake for $4.5 billion.
“The terms are very, very favorable to Sir James,” Pierre Barberis, chief executive of the Paris-based insurance holding company, said in an interview Friday in Los Angeles. Barberis said Axa Midi will urge Goldsmith to drop Hoylake’s attempt to have U.S. federal courts preempt the states’ authority on the constitutional ground that the takeover is a foreign affair.
Ready to Seek ‘Clearance’
Goldsmith seems more inclined now to follow Axa Midi’s advice. He said in a statement: “We are now reviewing the options available to us, in particular the most expeditious means of obtaining regulatory clearance in the U.S.”
Regulators in Idaho, Washington and Oregon have agreed to hear the Farmers case in October, Barberis said. Hearing dates remain to be set in California, Arizona, Texas, Kansas, Ohio and Illinois.
BAT called the takeover panel “wrong” in its ruling. The company charged that it “undermines one of the City Code’s fundamental principles by committing BAT Industries’ shareholders to an indefinite and damaging siege” and “throws a lifeline to a bid that was plainly failing on its merits.”
The panel took a different view, however. With Goldsmith having more time, it said, BAT shareholders will “have an opportunity to consider an offer for their company on its merits.” It also forbade Hoylake to buy more shares in the company until after it launches any renewed offer.
Tobacco, Retail Assets
Batus, the company’s U.S. subsidiary, owns Brown & Williamson, makers of Benson & Hedges, Viceroy, Lucky Strike, Kent and Kool cigarettes, as well as retailers Saks Fifth Avenue, Marshall Field and others.
Axa Midi plans to retain Farmers’ current management and would appoint its chief executive, Leo E. Denlea Jr., to Axa’s executive committee of representatives of each foreign subsidiary, Barberis said. In addition to agreeing to buy Farmers for $4.5 billion, Axa Midi would invest a further $930 million in Hoylake Investments.
Farmers, the nation’s third-largest writer of auto and home insurance and seventh-largest property-casualty insurer, would be Axa Midi’s largest insurance subsidiary.
