In August 1998, AMP launched a hostile $3.3 Billion takeover bidfor the GIO Insurance Group. The takeover took 17 months, and wasfinally concluded in December 1999 when AMP acquired a 100%controlling interest in GIO. Shareholders in GIO were initiallyoffered $5.35 per share, or one AMP share for every four GIOshares. The cash offer represented (approximately) a 30% premium onthe market value of GIO shares. The share exchange, based on AMPâsshare price at the time (around $20) was valued at just over $5.05.Mid December 1998, an independent report by Grant Samuel andAssociates commissioned by GIO, valued GIO shares at between $5.66and $6.71. On 20 December 1998, stock brokers Ord Minnett advisedGIO shareholders to accept the $5.35 offer. KPMG also stated theoffer was generous (as GIOâs shares were only valued between $4.28-$4.49 without the takeover offer).
Required:
(i) List three factors that can motivate hostile takeoveractivity in practice.
(ii) Identify the key risks associated with hostile takeoverbids for the acquirer in practice.
(iii) What actions can a target firm take to defend itselfagainst potential hostile takeover activity?
(iv) What is the purpose of independent valuation reports intakeover activity? What are the limitations (if any) of thesereports?
(v) Explain AMPâs post takeover performance in relation to GIO.What were the factors that contributed to this performance?
In August 1998, AMP launched a hostile $3.3 Billion takeover bidfor the GIO Insurance Group. The takeover took 17 months, and wasfinally concluded in December 1999 when AMP acquired a 100%controlling interest in GIO. Shareholders in GIO were initiallyoffered $5.35 per share, or one AMP share for every four GIOshares. The cash offer represented (approximately) a 30% premium onthe market value of GIO shares. The share exchange, based on AMPâsshare price at the time (around $20) was valued at just over $5.05.Mid December 1998, an independent report by Grant Samuel andAssociates commissioned by GIO, valued GIO shares at between $5.66and $6.71. On 20 December 1998, stock brokers Ord Minnett advisedGIO shareholders to accept the $5.35 offer. KPMG also stated theoffer was generous (as GIOâs shares were only valued between $4.28-$4.49 without the takeover offer).
Required:
(i) List three factors that can motivate hostile takeoveractivity in practice.
(ii) Identify the key risks associated with hostile takeoverbids for the acquirer in practice.
(iii) What actions can a target firm take to defend itselfagainst potential hostile takeover activity?
(iv) What is the purpose of independent valuation reports intakeover activity? What are the limitations (if any) of thesereports?
(v) Explain AMPâs post takeover performance in relation to GIO.What were the factors that contributed to this performance?
