March 23, 1998
Cendant's Talks to Acquire
American Banker Hit a Snag
By EMILY NELSON and LESLIE SCISM
Staff Reporters of THE WALL STREET JOURNAL
After finally getting in the door of American Bankers Insurance Group
Inc. last week, Cendant Corp. worked out terms of an agreement to buy
the Miami-based insurer for about $3.1 billion, but the talks appeared
snagged on some issues Sunday, people familiar with the matter said.
The companies had hoped to reach a pact by the close of business
Friday before a rival's competing offer to buy American Bankers for
$400 million less kicks in Monday at 2 p.m. EST. Rival American
International Group Inc., New York, had a definitive pact to buy
American Bankers until Cendant bid but agreed last week to step aside
until 2 p.m. Monday. Negotiations stalled as Cendant examines a
regulatory concern, people familiar with the matter said. There is some
debate about how American Bankers' credit-related insurance might be
regulated in the future because the insurance, which pays off loans if the
holder dies, is disabled or unemployed, is substantially more profitable
than other types of insurance. It has been criticized by consumer groups
and some regulators as overpriced.
Sunday, a spokesman for Cendant declined to comment. An agreement
could be announced as early as Monday, the people familiar with the
situation said.
The $3.1 billion, or $67 a share, acquisition pact would include the
financial terms as last publicly offered by Cendant, a marketing concern
based in Parsippany, N.J., and Stamford, Conn. Cendant would pay
51% of the purchase price in cash through a tender offer, and 49% in
stock.
AIG, as agreed last week, would receive about $110 million in break-up
fees if Cendant signs an agreement with American Bankers. Cendant
could ask AIG to extend its waiver period beyond 2 p.m. Monday.
The terms being discussed by Cendant and American Bankers would
give Cendant a maximum break-up fee of $94.5 million if a third-party
bidder emerges. That is considered unlikely because the $3.1 billion
purchase price -- four times the book value of American Bankers --
reflects one of the highest premiums ever paid for an insurance
company. |
