GENERALI STILL PURSUING AGF

PARIS -- Assicurazioni Generali S.p.A. has vowed to fight a counteroffer from Allianz A.G. Holding for French insurer Assurances Generales de France.

The Generali board was scheduled to meet over the weekend to develop a strategy to stymie the friendly takeover offer Allianz made for AGF last week.

Saturday's meeting was scheduled to work out "what kind of initiatives we shall use to defend our position and proceed," Benito Pagnanelli said on Friday.

Mr. Pagnanelli, deputy general manager of the Trieste, Italy-based insurer, is convinced the company will succeed in its bid.

But, he said, "If we lose one battle, we will continue battling" to make more acquisitions.

Allianz could become one of the world's largest insurers if its $10 billion offer to acquire AGF succeeds.

The offer was welcomed by the AGF Conseil d'Administration, the board of management, on the same day. The AGF board of directors also approved the offer, with one abstention. However, the offer must also win the approval of France's Finance Minister and AGF shareholders, who are considering the existing hostile takeover offer from Generali.

Some stock market analysts say the Allianz bid is just one more step in a French bidding and counterbidding saga -- which includes companies positioning for a possible takeover of state-owned Groupe des Assurances Nationales -- that will continue until year-end. However, some analysts speculate that the French government may not want to sell both insurers to overseas companies.

Allianz Versicherungs A.G., Allianz's main non-life unit, on Nov. 17 offered 18 billion deutsche marks ($10.4 billion) in cash, or 320 French francs ($55.20) per share, for AGF. It also offered a guaranteed 360 French francs ($62.10) for each share held until 2000.

This compares with the 300 franc ($51) per share offer by Italy's Generali made in mid-October (BI, Oct. 20).

The Allianz offer is conditional upon its ability to acquire at least 51% of AGF, said a statement from the Munich, Germany-based insurer.

Allianz's offer does anticipate continued support, however, for a bid by AGF and Italy's Agnelli family to acquire French conglomerate Worms & Cie., which owns French insurer Athena Assurances (BI, Oct. 13). The Worms & Cie. bid is expected to be finalized by the middle of next month. Allianz specifically noted that its goal of attaining at least 51% of AGF would take into account any added shares the French insurer sells to finance its offer to acquire Worms & Cie. and Athena.

Allianz and AGF have held negotiations about a friendly takeover bid for the past month, a spokesman for Allianz in Munich confirmed. Allianz filed its cash offer for AGF on Nov. 17 with French stock exchange authorities. AGF stock was trading at 295.5 francs ($51.06) per share on Nov. 14, and rose to 297.7 francs ($51.35) after the offer was announced.

An AGF statement noted that the Allianz offer includes guarantees and commitments with respect to AGF's domestic and overseas business. In addition, the Allianz bid would mean "the long-term retention of a significant proportion of AGF's shares by the public, and the continuing autonomy and independence of AGF's management and executive structures," the statement said.

The AGF board also said the financial terms of the Allianz offer are significantly better than the offer from Generali, which it views as hostile and unacceptable.

If Generali returns to the AGF board with a more attractive offer, Allianz would not necessarily become embroiled in a bidding war, said an Allianz spokesman. Any future deal is "beyond the issue of pricing" because it involves French government approvals among other things, he said. What's more, Allianz does not want "expansion at any price."

Allianz wrote 74.6 billion deutsche marks ($48.4 billion) in gross premiums in 1996. Premium volume in 1997 is expected to rise to 83 billion deutsche marks, said Henning Schulte-Noelle, chairman of the German insurer.

AGF wrote gross premiums of 69 billion French francs ($13.59 billion) in 1996, of which about 40% were life premiums. Combined, the two companies would have premium volume in 1997 of 110 billion deutsche marks ($63.2 billion) as well as 480 billion deutsche marks ($275.76 billion) of combined assets under management, Allianz estimated.

At the press conference last week in Paris, Mr. Schulte-Noelle said the proposed AGF acquisition is in line with main goals of the German insurer, which include:

A position among the top five insurers in each market in which Allianz operates.

A leading position in the world's major emerging insurance markets, especially Asia, central and eastern Europe and Latin America.

The expansion of life and health insurance business in each market with growth potential in these areas.

The building up of asset management for third parties as a core business of the group.

The enlarged group reinforced by the acquisition of Athena Assurances, would rank as one of the world's largest insurers and return it to its former position as the largest insurer in Europe -- lost when French insurers AXA and UAP merged. It would reach top-five status in Spain, Ireland and Belgium and boost its position in the French market to become the second-largest property and casualty insurer and fourth-largest life insurer. The AGF acquisition would provide Allianz with a major breakthrough into the French industrial insurance sector.

"AGF's market share in the French commercial lines business as well as their know-how and market penetration in marine, aviation and credit insurance will enable the enlarged group to better serve our multinational clientele," Mr. Schulte-Noelle said.

Although there is a certain amount of geographic overlap in the operations of the two companies, an Allianz spokesman said it is not substantial. If there had been substantial overlap, it would have made an offer from Allianz less likely, he said. Allianz currently operates in 58 countries, with top-five market positions in Germany, Austria, Switzerland, Italy, Hungary, the Czech Republic and Slovakia. Entering into a deal with AGF will help Allianz strengthen its position in Latin America, one of its target growth markets, and Allianz remains on the lookout for acquisitions to help boost its presence in certain markets.

Meanwhile, there has been speculation in the press and financial markets that the French government may not approve the sale of all of AGF to a foreign bidder.

Prior to the Allianz bid, the French government was expected to seek a French buyer for AGF's controlling stakes in credit and political risk insurers Coface and Societe Francaise des Assurances Credit.

An Allianz spokesman said the bid was not made on an "all or nothing" basis, and the French cartel authorities may decide that certain parts of AGF's business remain outside the deal, should it go ahead.

The future of Allianz's and AGF's joint holdings in German insurer Aachener & Munchener Beteiligungs A.G. also is up in the air, prompting speculation that those shares would be sold off if the Allianz-AGF deal goes through. The two companies hold a combined 38.5% stake in AMB.

The Allianz statement said, "the stakes in AMB held by Allianz and AGF are not regarded as strategic investments."