Bidding war for ClearView?

Interest in wealth management businesses heats up

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published August 8, 2012 1:04 pm AEST

Suncorp Limited (ASX: SUN) is rumoured to be considering a rival bid for ClearView Wealth (ASX: CVW) according to reports in the Australian Financial Review (AFR).

Private equity firm, Crescent Capital Management offered 50 cents in cash for each ClearView share in July 2012. At the time the share price was 44.5 cents. The company rejected that offer as being inadequate, and said that it was timed to take advantage of volatile investment markets. ClearView's majority shareholder, Guinness Peat Group Plc (ASX: GPG) with 47.8%, had also rejected the Crescent Capital offer on the basis that it was a substantial discount to the fair value of ClearView. Given the company had 61.5 cents in net assets, including $59m in surplus capital at the end of December 2011, the bid appears to be low.

Clearview specialises in providing financial advice, investment, superannuation and retirement options and life insurance – all products that Suncorp or its subsidiaries currently offer, which suggests it could be a good bolt on acquisition for Suncorp.

Like its insurance peers, QBE Insurance (ASX: QBE) and AMP Limited (ASX: AMP), Suncorp was hit by a rash of natural disasters, low investment returns and rising costs in 2010/11. Earthquakes in New Zealand and Japan and widespread flooding in Queensland were just some of the disasters. Suncorp's loss estimate for the second New Zealand earthquake alone was $400 million.

All three companies are expected to report earnings in the next few weeks, with investors hoping that their fortunes have turned around, due to the lack of natural disasters, and rising costs mostly offset by premium increases. A report by reinsurance broker Guy Carpenter said catastrophe-related insured losses totalled US$11 billion in the first six months of 2012, compared with US$76 billion over the same period in 2011.

Investors appear to be hoping for a bidding war over ClearView, with the shares currently trading at 54.5 cents, around 9% higher than Crescent Capital's offer price. The AFR article has suggested there could be several companies running the rule over ClearView. The sticking point is GPG. As the holder of 48% of ClearView, GPG can virtually dictate what the offer price will be for potential suitors.

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Motley Fool writer/analyst Mike King owns shares in QBE. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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