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St. Paul, Zurich Financial in talks
Shares in Swiss insurer surge after merger report
By MarketWatch
Last Update: 5:44 AM ET Mar 17, 2006
LONDON (MarketWatch) -- St. Paul Travelers Cos. is discussing the possibility of a merger with European insurance heavyweight Zurich Financial Services, according to a media report Friday.
The talks between St. Paul (STA : St Paul Travelers Companies Inc. of St. Paul, Minn., and Zurich Financial (CH:001107539: news, chart, profile) are preliminary and may go nowhere, The Wall Street Journal reported in its online edition.
The Journal report cited unnamed people familiar with the matter. See Wall Street Journal story (subscription required).
Combined, St. Paul and Zurich Financial could create a rival in size to American International Group Inc. (AIG : American International Group, Inc.
(AIG69.24, +0.58, +0.8%) , the only U.S. insurer with big international operations, according to the Journal report.
Shares in Zurich Financial were up 8.1% on Friday morning in European trading, though they jumped as much as 12% when the Swiss market opened.
Zurich Financial is one of Europe's largest insurers and a bigger company than St. Paul in terms of market capitalization. A purchase by St. Paul would be one of the largest European acquisitions ever made by a U.S. company.
A combined entity would have clear cost-cutting opportunities and efficiency gains, said Tim Dawson, an analyst at Swiss broker Helvea. He said St. Paul would benefit from greater diversification through Zurich Financial's life insurance and non-U.S. businesses.
Zurich Financial is also attractive because of its low valuation and solid earnings outlook, said Dawson. "Zurich Financial is a share that should be bought on its own merits. Any corporate activity would be the icing on the cake."
Zurich Financial has a $33.6 billion stock-market value, compared with a value of $29.9 billion for St. Paul Travelers, according to The Journal.
However, Dawson said the structure of any potential deal could prove a sticking point.
"It is debatable whether an outright acquisition by St. Paul would be the most likely combination," he said.
"We do not think that Swiss and other interested regulators would look kindly on a highly geared bid structure...but a merger leading to a dual-listed single holding company could be a possibility."
Together, the companies racked up more than $90 billion in revenue last year and employed more than 85,000, The Journal reported.
Zurich Financial has businesses in 50 countries and already ranks as one of the top U.S. property and casualty insurers for both businesses and individuals. St. Paul Travelers operates primarily in the U.S.
A spokeswoman for Zurich Financial told MarketWatch the company does not comment on speculation. The Journal said a spokesman from St. Paul Travelers similarly declined comment.
The takeover talk, along with earnings from British insurer Legal & General (UK:LGEN: news, chart, profile) , lifted the broader European insurance sector on Friday.
Legal & General, Prudential (UK:PRU: news, chart, profile) and Royal & Sun Alliance (UK:RSA: news, chart, profile) all advanced in higher London trading.
The benchmark FTSE 100 index breached the 6,000-point mark in the morning for the first time in five years, in part on insurer strength. See London Markets. Continental markets also advanced. See Europe Markets.
St. Paul, Zurich Financial in talks
Shares in Swiss insurer surge after merger report
By MarketWatch
Last Update: 5:44 AM ET Mar 17, 2006
LONDON (MarketWatch) -- St. Paul Travelers Cos. is discussing the possibility of a merger with European insurance heavyweight Zurich Financial Services, according to a media report Friday.
The talks between St. Paul (STA : St Paul Travelers Companies Inc. of St. Paul, Minn., and Zurich Financial (CH:001107539: news, chart, profile) are preliminary and may go nowhere, The Wall Street Journal reported in its online edition.
The Journal report cited unnamed people familiar with the matter. See Wall Street Journal story (subscription required).
Combined, St. Paul and Zurich Financial could create a rival in size to American International Group Inc. (AIG : American International Group, Inc.
(AIG69.24, +0.58, +0.8%) , the only U.S. insurer with big international operations, according to the Journal report.
Shares in Zurich Financial were up 8.1% on Friday morning in European trading, though they jumped as much as 12% when the Swiss market opened.
Zurich Financial is one of Europe's largest insurers and a bigger company than St. Paul in terms of market capitalization. A purchase by St. Paul would be one of the largest European acquisitions ever made by a U.S. company.
A combined entity would have clear cost-cutting opportunities and efficiency gains, said Tim Dawson, an analyst at Swiss broker Helvea. He said St. Paul would benefit from greater diversification through Zurich Financial's life insurance and non-U.S. businesses.
Zurich Financial is also attractive because of its low valuation and solid earnings outlook, said Dawson. "Zurich Financial is a share that should be bought on its own merits. Any corporate activity would be the icing on the cake."
Zurich Financial has a $33.6 billion stock-market value, compared with a value of $29.9 billion for St. Paul Travelers, according to The Journal.
However, Dawson said the structure of any potential deal could prove a sticking point.
"It is debatable whether an outright acquisition by St. Paul would be the most likely combination," he said.
"We do not think that Swiss and other interested regulators would look kindly on a highly geared bid structure...but a merger leading to a dual-listed single holding company could be a possibility."
Together, the companies racked up more than $90 billion in revenue last year and employed more than 85,000, The Journal reported.
Zurich Financial has businesses in 50 countries and already ranks as one of the top U.S. property and casualty insurers for both businesses and individuals. St. Paul Travelers operates primarily in the U.S.
A spokeswoman for Zurich Financial told MarketWatch the company does not comment on speculation. The Journal said a spokesman from St. Paul Travelers similarly declined comment.
The takeover talk, along with earnings from British insurer Legal & General (UK:LGEN: news, chart, profile) , lifted the broader European insurance sector on Friday.
Legal & General, Prudential (UK:PRU: news, chart, profile) and Royal & Sun Alliance (UK:RSA: news, chart, profile) all advanced in higher London trading.
The benchmark FTSE 100 index breached the 6,000-point mark in the morning for the first time in five years, in part on insurer strength. See London Markets. Continental markets also advanced. See Europe Markets.
posted by Jones Lang LaSalle NJ News Blog at 10:01 AM
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