Listen to this article
Give us your feedback Thank you for your feedback.
What do you think?
Allianz, the German insurance company, will spend almost €2bn buying out minority shareholders in Euler Hermes, the trade credit insurer.
Oliver Bäte, the chief executive of Allianz, has been scouring the globe for acquisitions, especially in general insurance, but reasonably priced targets have been hard to find.
The company has owned a stake in Paris-listed Euler Hermes, which insures companies against the risk that customers do not pay what they owe, since 1998. On Monday, it announced that it had bought another 11 per cent in a private deal for €122 per share, and would launch a tender offer for the remaining 26 per cent at the same price.
Euler Hermes shares rose 20 per cent in response to almost €122, a record high.
Allianz said the deal was a “logical step” to “strengthen positions in core home markets and in property and casualty in particular”. It will formally launch the tender offer “in the coming weeks”.
Analysts welcomed the move. Paul De’Ath at RBC Capital Markets said: “Within Allianz’s portfolio of P&C businesses, credit insurance is one of the most profitable units.”
Buying out the Euler Hermes minority shareholders would improve Allianz’s overall profitability and provide diversification benefits. “Credit insurance . . . risk is not generally correlated to the more traditional personal and commercial lines books written by Allianz,” he added.
Allianz said the deal would increase earnings per share by 1 per cent, and not affect its share buyback plan. This month, the company said it would spend another €2bn on its own shares in 2018, on top of a €3bn buyback plan already in place.
Allianz’s Solvency II capital ratio — a measure of capital available as a proportion of the minimum required — was 227 per cent at the end of September, ahead of the target range of 180 to 220 per cent. The deal will knock 4 percentage points off the solvency ratio.
The German group said that it would not change Euler Hermes’ supervisory board or strategy after the buyout.
Euler Hermes board said it “welcomed the principle” of Allianz’s offer, and had appointed an independent expert to look at the financial terms.
In August, Allianz signed a £713m deal to buy a 70 per cent stake in LV, the UK general insurer, in stages during the next two years.