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Allianz plans to buy rest of Euler Hermes for $2.2 billion

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Allianz plans to buy rest of Euler Hermes for $2.2 billion

(Reuters) — Germany's biggest insurer, Allianz S.E., plans to buy the shares in French credit insurance firm Euler Hermes it does not yet own for around €1.85 billion ($2.2 billion).

Allianz said on Monday that it struck a deal to buy 11.3% of Euler Hermes' stock for €122 per share in cash, taking its holding to 74.3% of shares.

It plans to make a public takeover offer for the remaining stock, excluding treasury shares, at the same price, a 21% premium to Friday's closing price.

"Increasing ownership in Euler Hermes is... 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," Allianz said in a statement.

The deal will add about 1% to group earnings per share immediately and will reduce Allianz's solvency ratio by 4 percentage points, the group said.

Analysts said the offer seemed expensive at around 16 times Euler Hermes' estimated 2018 earnings, after Euler Hermes' stock gained more than 20% this year, but made sense for Allianz.

"We believe the minority buyout is a strategically sensible move (which was discussed multiple times in the past) as it is a low-risk way to increase the exposure to the attractive credit insurance business segment," Baader Helvea analyst Daniel Bischof said in a note.

Shares in Euler Hermes jumped 21% to a record high of €122.30 in early trade. They had jumped in June on a media report that Allianz was considering a buyout.

Allianz shares were down 0.2% at €197.55.

Allianz said the takeover offer would have no impact on its €2 billion share buyback program.

Euler Hermes said in a separate statement that its supervisory board would meet to deliver a formal opinion regarding Allianz's offer during the last days of December.

Analysts at Kepler Cheuvreux recommended that Euler Hermes shareholders accept Allianz's offer and lifted its target price to €122 from €97.

 

 

 

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