Promina Shareholders Endorse Takeover By Suncorp BUSINESS ASIA By Bloomberg

By Kevin Foley and Joyce Moullakis

John Mulcahy, chief executive officer of Suncorp-Metway, will choose an executive team and proceed with a share sale after Promina Group investors Monday approved a 7.5 billion Australian dollar, or $5.9 billion, takeover bid.

Promina shareholders voted in favor of the offer at a meeting in Sydney. The acquisition by the Brisbane-based Suncorp, which will become Australia's second-largest car and home insurer, is the biggest takeover in the nation's financial services industry in almost seven years.

Mulcahy is buying Promina, the nation's second-largest car and home insurer before the takeover, to add brands including the auto insurer AAMI to help revive sales which slowed last year. He said Feb. 20 that it was too early to discuss the composition of an executive team for the combined group, though Promina management may be represented in some lines of insurance.

"It will all come down to how they integrate and who is running the various businesses," said Andrew Kearnan, an analyst at Merrill Lynch in Sydney, before the meeting. "That's what the market is waiting to hear before making a decision on the prospects" for the combined group, he said.

Suncorp has said it expects to sell 1.15 billion dollars of stock to individual and professional investors to help fund the Promina purchase. Citigroup will underwrite the sale.

Promina's chief executive officer, Mike Wilkins, has agreed to a six-month consulting role with the new group. Investors in Sydney- based Promina will own 30 percent of the combined company after 99.8 percent of shares voted at the meeting were in favor of the bid.

Mulcahy said his priority will be the appointment of senior executives. "We will be undergoing a rigorous process to identify the strongest possible management team," he said after Monday's meeting. "With much of the integration planning work already under way, our ongoing focus will now be on capturing the best of both organizations."

Promina income from premiums is increasing even as the bigger Insurance Australia Group of Sydney cuts prices and increases advertising. Promina's net income rose 19 percent to 329 million dollars in the six months ended Dec. 31. Wilkins increased full- year insurance sales by 6.1 percent, more than industry growth of 2.6 percent, after winning market share from competitors.

For Suncorp, which is also Australia's sixth-biggest bank, the challenge will lie in integrating its larger insurance competitor; Suncorp's policy sales slipped 1.2 percent to 1.28 billion in the half ended Dec. 31.

"We do see that they've got a huge, a massive, integration issue," QBE Insurance Group's chief executive officer, Frank O'Halloran, said Feb. 23. That includes choosing a management team, he said. QBE is Australia's largest property and casualty insurer.

Insurance Australia's first-half profit fell 25 percent to 345 million dollars, after it cut prices to regain customers and earned less from investments. The chief executive, Michael Hawker, cut some car policy rates by 4.9 percent to compete with Promina.

Suncorp has bid 1.80 dollars cash and 0.2618 of its shares for each Promina share. The offer valued Promina stock at 7.16 dollars after Suncorp shares fell 44 cents to 20.47 dollars.

Suncorp, Australia's No. 3 car and home insurer, reported a 16 percent rise in profit to 527 million dollars in the six months ended Dec. 31 on higher lending and fewer-than-expected claims. Mulcahy expects 225 million dollars of annual cost savings from combining with Promina.

The acquisition, which is due to be implemented March 20, is expected to add to earnings in the second year after the transaction.

(c) 2007 International Herald Tribune. Provided by ProQuest Information and Learning. All rights Reserved.