Allianz to buy remaining shares in Euler Hermes

Allianz has agreed to buy the remaining shares of credit insurer Euler Hermes it does not already own through a simplified cash tender offer.

The German insurer has already secured the purchase of 11.34% of the shares from existing shareholders at €122 each. The offer will be for the remaining 24.2% of non-treasury shares that it does not already own, also at €122 per share. This represents a 21% premium to the closing price on Friday 24 November 2017.

Allianz said the deal should be immediately accretive to earnings per share by around 1% and will impact its solvency position to the tune of -4 percentage points.

"Underwriting excellence proven through the cycle, risk analysis and integrated global structure together with a strong and experienced management team provides the basis for Euler Hermes’ long-term growth prospects in trade credit insurance, bonding and selected other specialties.

"Increasing ownership in Euler Hermes is therefore a logical step for Allianz to deploy capital in strategic businesses delivering solid operating performance, and to strengthen positions in core home markets and in property and casualty in particular."

Olivetree Financial said this is a very straightforward transaction which should be closed in February of next year, "the only potential angle here seems to be the ability for minorities to prevent Allianz from squeezing out".

"French simplified tenders see the bidder sit in the market acquiring shares, so one should expect to see Euler Hermes shares sit at (or very close to) 122 between now and offer close. Should minorities think there is an angle to hold out for improved terms in a squeeze out, of course the shares will trade above this level and Allianz will fail to add meaningfully to its holding."

RBC Capital Markets also said it looked like a fairly straightforward transaction.

"Increasing the group's exposure to credit insurance should help to reduce the overall combined ratio and enhance profitability, in our view. Credit insurance also provides diversification benefits as the risk is not generally correlated to the more traditional personal and commercial lines books written by Allianz," it said.

"Allianz has stated that it believes the deal will be immediately EPS accretive by around 1%. We expect that this benefit largely comes as the alternative - generating a return on accumulated capital - is likely to be very low given the current macro environment."

At 1020 GMT, Allianz shares were up 0.3% to €198.50.