Axa Midi Accuses BAT of Using ‘Poison Pill’ Tactic

French insurer Axa Midi Assurances accused BAT Industries on Friday of using its Farmers Group subsidiary as a “poison pill” in a takeover battle.

Axa Midi would own Los Angeles-based Farmers Group if Sir James Goldsmith is successful in his effort to purchase BAT Industries in what would be history’s second-largest takeover.

“BAT is trying to manipulate the U.S. insurance regulators into playing a spoiler role in an international takeover battle,” Claude Bebear, chairman of Paris-based Axa Midi Assurances, charged in a statement released in New York.

In effect, Goldsmith finds his Hoylake Investments in a Catch-22 trap: U.S. insurance regulators refuse to approve the sale of Farmers without details of Hoylake’s takeover terms, yet the British takeover panel forbids a formal offer for BAT Industries until Farmers’ change of ownership wins U.S. regulatory approval.

Recognizing this quandary, Britain’s Panel on Takeovers and Mergers allowed Goldsmith to let his original bid lapse until he obtained U.S. regulatory clearances. He then would have 21 days to renew the offer and 60 days to complete the takeover.

Hoylake, however, is interested only in BAT’s tobacco business. Consequently, it agreed to sell Farmers to Axa Midi as soon as it succeeded in taking over BAT. In turn, Axa Midi agreed to invest $1 billion in Hoylake’s takeover venture and to pay it $4.5 billion for Farmers.

Bebear accused BAT of “holding Farmers’ policyholders hostage.”

“It is clear,” he went on, “that BAT instigated the call for additional information on the bid even though the takeover panel had not required it. BAT wants to frustrate the hearing process in the U.S. as long as possible and, by doing so, is only hurting Farmers.”

For its part, Farmers characterized the additional information that Hoylake submitted Thursday in an effort to placate U.S. regulators as “a debt-laden, hypothetical scheme.” Those terms, based on current market conditions and BAT’s current holdings, would amount to $13.60 a share or $20.6 billion, making it second in magnitude only to the $25-billion leveraged buyout of RJR Nabisco.