Rival bids on cards for Promina

Suncorp-Metway's A$7.9 billion ($9 billion) offer for Promina may spur rival bids by Australian companies such as QBE Insurance and Westpac Banking Corp, bankers and analysts say.

"Suncorp bidding for Promina will trigger other events," said Greg Bundy, former head of Merrill Lynch's Australian unit and now executive chairman of InterFinancial, a merger advisory firm in Sydney.

"Whether it's just Promina being taken out or even Suncorp being put in play is a very viable option."

Suncorp's purchase, part of a record US$135 billion ($204 billion) of takeovers announced in Australia this year, would more than double the Brisbane-based company's car and home insurance sales, reversing a slump in premium growth. QBE chief executive Frank O'Halloran said in August he may be interested in buying Promina or teaming with a bank to buy Suncorp, the nation's fourth-biggest general insurer and No 6 bank.

"Suncorp itself may be subject to a bid," said Brett Le Mesurier, an analyst at Wilson HTM in Sydney.

Suncorp's cash and stock offer values Promina shares at A$7.61 each at Thursday's closing price.

"Both Promina and Suncorp itself offer several strategic attractions for acquirers," Andrew Kearnan, an analyst at Merrill Lynch in Sydney, said in a report, citing Promina's profitable AAMI brand and Suncorp's dominant position in Queensland, the nation's second-fastest growing state. "The prospects may drag in banks as well as other insurers," he said.

"QBE would be a very logical bidder for Promina," said Bundy. "Westpac, which is rumoured to have had talks with Suncorp, is also looking at the insurance game much more closely these days."

In buying Promina, Suncorp chief executive John Mulcahy aims to revive growth in insurance sales, which slowed to 2.7 per cent in the year ended June 30, from 4.6 per cent a year earlier.

A successful acquisition would be the largest in Australia's financial-services industry since Commonwealth Bank of Australia paid A$9.6 billion for Colonial in 2000.

Announced takeovers in Australia are up 20 per cent in 2006 from last year's US$112 billion. Suncorp's offer for Promina is the year's second-largest, behind a Kohlberg Kravis Roberts-led A$17 billion buyout bid for retailer Coles Myer.

"After Suncorp's bid for Promina, I'm sure there are a lot of investment bankers running their numbers on various merger and acquisition possibilities," said InterFinancial's Bundy.

- BLOOMBERG