American General Gets Takeover Bid

American General Corp., a large diversified insurance company, said today it received a $50-a-share takeover bid worth an estimated $6 billion from Torchmark Corp., a much smaller insurer.

The surprise offer sent American General stock hurtling $6.87 higher to $38.87 a share in heavy New York Stock Exchange trading.

The Value Line Investment Survey ranks it as the No. 4 insurance company in the United States based on premiums written. Its acquisition would make it the largest insurance takeover yet, topping the $5.2-billion BAT Industries buyout of California’s Farmer’s Group.

American General in recent years has shed some of its less profitable operations. But it remains among the nation’s largest premium writers in individual health and life insurance.

American General also has a large consumer finance division, part of which it acquired when it bought Manufacturers Hanover’s consumer finance division in 1988.

Torchmark, a smaller but faster-growing insurance concern based in Birmingham, Ala., is about half the size of American General.

An acquisition of American General would revive a recent trend toward consolidation in the industry that was interrupted by the general slowdown of mergers and acquisitions. It would be the largest takeover of any kind so far this year.

Torchmark has proposed that half of American General’s shares be paid for in cash while half would be acquired in an exchange for Torchmark stock.

Indicating that the bid was unwelcome, American General said its board will consider the offer at its next regularly scheduled board meeting on May 2, ignoring Torchmark’s request that it respond by the close of business today.

American General said Torchmark said all aspects of the proposal are negotiable.

The proposal makes no mention of how Torchmark would finance the $3.2-billion cash portion of the purchase price.