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PARIS-Assurances Generales de France has joined with Italy's Agnelli family in a bid for French conglomerate Worms & Cie.

If the bid succeeds, AGF would acquire Athena Assurances, which is 99.7% owned by Worms & Cie. It follows a hostile takeover bid for Worms last month by French businessman Francois Pinault; the supervisory board of Worms & Cie. advised shareholders to reject that bid (BI, Sept. 29).

Worms & Cie. Chairman Nicolas Clive Worms has said he is in favor of the new offer, made earlier this month. The supervisory board of Worms & Cie. voted last week to recommend the new offer to shareholders. A vote on the offer is scheduled for Nov. 14.

AGF also remains interested in buying state-controlled French insurer Groupe des Assurances Nationales, slated to be privatized. The combination of AGF, GAN and Athena would make AGF the second-largest insurer in France. AXA-UAP is the largest French insurer.

The new offer for Worms & Cie. is worth 31.5 billion French francs ($5.33 billion), compared with the Pinault offer, which values Worms for 28 billion francs ($4.74 billion). Until the AGF/Agnelli offer, the Pinault bid was the largest ever takeover bid in France.

Stock market analysts do not think the situation will be resolved very soon. "It seems the market is not convinced the (second) offer will go through. It could be trumped by someone else. Mr. Pinault could come back," said Michael Lindsay, insurance analyst at London based investment bank Lehman Brothers.

Even if the AGF/Agnelli offer succeeds, AGF still could be targeted for takeover by a foreign insurer or bank as financial institutions in Europe consolidate in anticipation of the European Monetary Union, Mr. Lindsay believes.

If AGF succeeds in acquiring both Athena and GAN, it will take some time to merge the acquisitions into its organization, a period at which its share price could be low and make AGF a takeover target for a foreign company.

"In the interim period when the share price is low, it is difficult not to see AGF in the middle of a game for survival," Mr. Lindsay said.

Athena is the 15th-largest insurer in France. It wrote 18.6 billion francs ($3.58 billion) in gross premiums in 1996, divided about equally between life and non-life business.

Last year AGF considered the possibility of buying Athena, but the talks ended as Worms decided what to do with the company.

AGF holds 7.3% of Worms. The Agnelli family, which controls the Turin, Italy-based car manufacturer Fiat S.p.A., is using its holding company IFIL, which holds 20% of Worms, as its instrument in the bid. These stakes will be placed in SOMEAL, a 100%-owned subsidiary of IFIL. In addition, Worms family members will contribute a further 13.3% stake in Worms & Cie. to SOMEAL. As a result, the initiators of the offer already will control more than 40% of Worms & Cie., SOMEAL and AGF said in a joint statement.

In addition to Athena, Worms holds major stakes in food, paper, transport and other financial services companies. The joint statement said the aims of the bid are:

To avoid breaking up Worms & Cie. industrial assets.

To strengthen the position of AGF as the second-largest French insurance group.

If the offer is successful:

AGF will acquire Athena on a valuation of 12 billion francs ($2.03 billion) for 100% of he company.

All of the shares Worms & Cie. contributed to AGF in the context of the bid will be sold to SOMEAL.

The offer to Worms' shareholders is two-fold:

A main offer to exchange five Worms & Cie. shares for 1,820 francs ($308), two AGF shares and one AGF contingency value right share. A CVG guarantees a minimum share price to the investor.

To exchange one Worms & Cie. share for two AGF shares and one CVG AGF share. This offer is limited to a maximum of 7 million Worms & Cie. shares.

The AGF CVG guarantees the value of one AGF share at 270 francs ($45) as of May 31, 2000, with a maximum limit of 60 francs ($10) per CVG. The CVG will be quoted immediately at 30 francs ($5).

The merger push among European financial institutions is a reaction to both customer demand to buy all their financial services from one company and to the imminent EMU, said Mr. Lindsay. "Things are changing. Maybe we are seeing the creation of financial powerhouses in Europe," he said.

Most insurers and banks in Europe are strong only in their domestic markets, so a single currency will force them into more competition. "We are going to see companies pursuing European market share," Mr. Lindsay says.

Standard & Poor's reaffirmed the AAA- claims-paying ability rating for AGF after the offer. The affirmation was based on the present offer price and deal structure and reflects the potential for AGF to strengthen its position in the French non-life market, S&P said.

"The acquisition of Athena will provide an opportunity for AGF to make further efficiency gains in both France and Spain, where both companies have operations although progress towards the target return on equity may be held back by a general softening in premium rates across the French insurance market," the S&P statement said