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M&M IN TALKS FOR MINET

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NEW YORK-After standing on the sidelines of merger mania during the past few years, Marsh & McLennan Cos. Inc. is on the offensive.

The New York-based broker last week confirmed it is in negotiations with The St. Paul Cos. Inc. to acquire London-based broker Minet Group. One week earlier, M&M acquired a 41% interest in French broker Cie. Europeenne de Courtage d'Assurances et de Reassurances.

Neither St. Paul nor M&M would comment about a pending transaction, only to affirm they are in negotiation regarding the sale of Minet's brokerage operations, excluding wholesale unit Swett & Crawford Group and Australian reinsurance broker Minet Burn Roche.

St. Paul retained Goldman Sachs International last August to assist it in examining strategic alternatives for Minet, which has struggled financially over the past few years (BI, Sept. 2, 1996).

Late last year, Alexander & Alexander Services Inc. entered a bid to buy Minet from St. Paul but withdrew it when Aon Group Inc. offered to acquire A&A for $1.23 billion in cash (BI, Dec. 16, 1996).

After the Aon/A&A combination was announced, rumors in the market ran rampant thatM&M, which also had been in the bidding for Minet at the time, would be quick to step in and close a deal, especially because Aon now eclipses M&M as the world's largest retail broker and reinsurance intermediary.

Market observers generally were not surprised by the announcement, noting Minet has been on the block for some time, but some stock analysts questioned M&M's motives for buying Minet.

Minet posted a pretax loss for the fiscal year ended Sept. 30, 1995, of $13 million, a 30% larger loss from a $10 million loss in fiscal 1994. Revenues, though, were up 6.7% during the same period to $370.9 million from $347.6 million. 1996 results are to be released this week.

"The Marsh Mac management seems to be quite intelligent," said a London analyst who asked not to be named. It would be very risky if M&M was buying Minet for No. 1 status, he said. "It is not a very good strategic justification."

John Wicher, managing director of Russell Miller Inc. in San Francisco, said: "Marsh isn't a reactive company. Being impulsive is not Marsh's style and it's inconsistent with its leadership."

One U.S. analyst, though, said he thinks M&M's move is wholly in reaction to the Aon deals.

"Aon has been super aggressive (acquiring brokers) while M&M has been lying there dead in the grass," the analyst said.

The U.S. analyst did point out that the sale last year of The Frizzell Group Ltd. for $290 million does give M&M ample cash to make an acquisition. The unit, which specialized in program management business for affinity groups, was sold to Liverpool Victoria Friendly Society.

Minet also has some attractive speciality business that might be attractive to M&M, observers say. These include its professional liability program for accountants and lawyers and a directors and officers liability book for companies in the biotechnology and information technology fields.

"Minet historically is a company that provides professional coverages for accountants and the like. For Marsh, this fits in very nicely," Mr. Wicher said.

Specialty markets "appears to be the theme in consolidation," he said. And Minet's specialty businesses would "add a new complexion to Marsh's existing capabilities," he said.

M&M has said it plans to develop more "expert practices" (BI, July 22, 1996).

If the Minet deal were to close, M&M would secure its spot as the world's largest broker, with $4.2 billion in combined gross revenues.

It also would catapult M&M back to the top spot among the world's largest reinsurance brokers. Combined, Guy Carpenter & Co. Inc. and Minet Re would have $404.4 million in revenues. This would surpass the combined Aon Re Worldwide Inc. and Alexander Reinsurance Intermediaries Inc., whose combination ranks as No. 1 with an estimated $396 million in revenues.

But a Minet deal would not be enough for M&M to regain its position as the world's largest retail broker. Combined, the brokers would have $1.7 billion in retail brokerage revenues, just shy of Aon's acquisition-fueled $1.9 billion.

Even if M&M could add the revenues from its newly acquired stake in CECAR, it would not be enough to surpass Aon.

M&M's purchase of a 41% stake in Paris-based CECAR significantly boosts the broker's presence in the French market.

M&M has bought the direct and indirect shares in CECAR that were held by Bain Hogg P.L.C., which Aon acquired last year (BI, Oct. 21, 1996). That holding consisted of a 36% direct holding in CECAR and a 10% share of CECAR Participations. The latter company is controlled by the CECAR management and owns 45% of the French broker.

CECAR had risen to be the world's 18th-largest broker, following Aon's acquisitions of Bain Hogg and A&A.

M&M already has a strong presence in France via wholly owned subsidiary Faugere & Jutheau, France's fourth-largest broker. The combination of Faugere & Jutheau and M&M's interest in CECAR, France's second-largest broker, could mean added competition for Gras Savoye S.A.

Gras Savoye is France's largest broker and has risen to No. 12 worldwide, after the recent Aon purchases.

Neither M&M nor CECAR spokesmen would reveal the price of the deal. But London stock market sources suggested the price was $60 million, a figure that would value CECAR at $140 million. CECAR's 1995 gross revenues were $138.3 million (BI, July 22, 1996).

Insurance market analysts said CECAR had held talks about a possible sale of the former Bain Hogg stake with a number of brokers, including Aon.

M&M and CECAR spokesmen said it is too early to speculate about any future merger between Faugere & Jutheau and CECAR in the French market.

"There are synergies between CECAR and Faugere & Jutheau, and we hope to take advantage of them," said an M&M spokeswoman in New York.

Sarah Goddard contributed to this report.