Swiss-Led Group Will Buy Kemper : Finance: The investors will pay $2 billion for the company, which rejected a hostile bid by General Electric last year.
A group of U.S. and Swiss investors led by Zurich Insurance Group agreed to pay $2 billion for Kemper Corp., a year after the U.S. asset management and life insurer rejected a $2.4-billion hostile bid by General Electric Co.
News of the deal drove Kemper’s stock up $4.375, or nearly 11%, to $45.75 on the New York Stock Exchange.
The price tag is also far below that offered by Conseco Inc. last year during a bidding war for the financial services company. But analysts say the price reflects the realities of today’s financial markets.
Kemper put itself up for sale last year after spurning an offer of $60 a share, or $2.4 billion, from GE. It subsequently agreed to be acquired by Conseco for $67 a share, or $3.25 billion, but the deal fell through in November after Conseco failed to obtain financing.
Under the terms of the proposed deal, Kemper said, its common stockholders would receive $47.50 a share in cash and preferred stock worth $2 a share, subject to upward adjustment after three years depending on certain real estate values. Prior to closing, Kemper would complete the spinoff to shareholders of its troubled securities brokerage operations.
As part of the deal, Zurich would purchase the Kemper Financial Services unit, one of the largest asset managers in the country. Kemper Corp., including its life insurance subsidiaries and real estate holdings, would then be majority-owned by Zurich.
Zurich Insurance, Switzerland’s second-largest property and casualty insurer, has been expanding its presence in the United States. It would own 51% of Kemper under the proposed deal.
Insurance Partners--an investment group whose major partners are Zurich Insurance subsidiary Centre Reinsurance Holdings, Robert Bass’ Keystone Inc. and Chase Manhattan Corp.--would own 49%.
Kemper Chairman David B. Mathis said the deal is a good match for Kemper, which employs 6,000 and is based in the Chicago suburb of Long Grove.
“The Zurich Insurance Group is a well-established, well-respected and highly rated global company with significant financial resources, which can help us continue to grow,” Mathis said in a statement.
Rolf Hueppi, president and chief executive of Zurich Insurance, said acquiring Kemper will raise his company’s profile in North America.
Hueppi told a news conference in Switzerland that the weak U.S. dollar increased Kemper’s appeal. The dollar has fallen about 23% against the Swiss franc since January, 1994.
Kemper’s value has also been reduced by higher U.S. interest rates since last year, said Larry Brossman, a fixed-income analyst with the investment firm Duff & Phelps Inc. in Chicago.
Higher rates have reduced the price of U.S. government bonds, prompting investors to withdraw from Kemper’s bond mutual funds. Kemper’s total assets under management fell 9.5% last year to $62.7 billion.
The company had also some negative publicity recently from resignations of some senior executives, $19.3 million in losses from Orange County bonds, and a Securities and Exchange Commission complaint accusing Kemper’s brokerage arm of fraudulently diverting stock to its profit-sharing plan. Kemper said no mutual funds suffered losses as a result of its actions.
A definitive agreement is expected early next month and will be subject to approval from Kemper’s board and stockholders, as well as Zurich’s board and government regulators.
Kemper has about $98 billion in life insurance in force; it claims the nation’s 11th-largest mutual fund family, with $42 billion in assets. It also manages $21 billion in assets for Kemper’s life insurance companies and other customers.
