GIO Prosposes That AMP Acquire 100% of GIO

Document date:  Fri 24 Sep 1999
Published:  Fri 24 Sep 1999 00:00:00
Document No:  191501
Document part:  A
Market Flag:  Y
Classification: 

GIO AUSTRALIA HOLDINGS LIMITED                1999-09-24  ASX-SIGNAL-G

HOMEX - Sydney                                                        

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GIO PROPOSES THAT AMP ACQUIRE 100% OF GIO

EXIT MECHANISM FOR MINORITY SHAREHOLDERS AT $3.05 PLUS CONTINGENT
INSTRUMENT PROVIDING FOR POTENTIAL FURTHER PAYMENTS DEPENDANT ON THE
RESULTS OF GIO REINSURANCE

The independent directors of GIO Australia Holdings Limited ("GIO")
announce that GIO proposes to put be0
fore its shareholders for
consideration a scheme of arrangement under Part 5.1 of the
Corporations Law which, if implemented, would result in AMP Group
("AMP") acquiring the 43% of GIO it does not already own ("Scheme").

The Chairman of GIO, Mr Paul Mazoudier, stated: "The independent
directors unanimously recommend to shareholders not associated with
AMP that they vote in favour of the Scheme, as it represents an
opportunity for them to exit their investment in GIO for a
co0
nsideration which, subject to the opinion of an independent expert,
the directors view as fair and reasonable."

Mr Mazoudier added that, having regard to the circumstances described
below, the independent directors of GIO consider the Scheme to be in
the best interests of GIO shareholders not associated with AMP:

* The independent directors of GIO have explored a number of capital
funding options for GIO in recent months. None of the options were
considered to deliver an ou0
tcome as beneficial to the minority
shareholders as the Scheme.

* The directors are also aware of the pending litigation against GIO,
and the potential for that litigation to diminish goodwill in the
company and jeopardise its businesses, to the detriment of
shareholder value.

* Following implementation of the Scheme, AMP will recapitalise GIO to
ensure regulatory capital requirements are satisfied.

* GIO Reinsurance has recently reported significant losses which have
prec0
ipitated the need for GIO to secure substantial additional
capital, as identified in the company's announcement of 16 August
1999. Because of the risk exposures under current reinsurance
contracts and the inherent volatility in the management of long-tail
claims settlements, the independent directors of GIO have had
difficulty in properly estimating the current value of GIO
Reinsurance. Therefore, they have negotiated a structure which
ensures that minority shareholders recei0
ve further consideration that
is dependant on the results of GIO Reinsurance in the next 3
financial years.

"AMP has undertaken to GIO to support the proposal," Mr Mazoudier
said.

Under the Scheme all GIO shares not held by AMP will be transferred
to AMP, each in consideration for listed debt instruments of AMP
("AMP Notes") so as to receive a face value equivalent to $3.05 per
share.

In addition, AMP will issue each GIO shareholder (other than AMP)
with an unlisted contin0
gent instrument of AMP ("Contingent
Instrument") potentially entitling the holder to 2 cash instalments:

(a) an amount payable by AMP in September 2000 of 22c per share less
any losses in GIO Reinsurance (excluding return on shareholders
funds) per GIO share for the 12 month period to 30 June 2000; and

(b) an amount payable by AMP in September 2002 reflecting per GIO
share accumulated business profits (if any) of GIO Reinsurance during
the period 1 July 2000 through 30 June0
 2002 (or earlier sale of whole
or part of GIO Reinsurance), after taking into account a risk return
on AMP's investment in that business during that period.

Further details on the AMP Notes and the Contingent Instrument are
contained in Annexure 1 to this announcement.

A meeting of GIO shareholders not associated with AMP ("Scheme
Meeting") will be convened for mid-December 1999 to vote on the
Scheme, and be held immediately before GIO's Annual General Meeting
which is to 0
be postponed to that time. Further details on the process
of implementing the Scheme are contained in Annexure 2 to this
announcement.

The independent directors of GIO propose shortly to engage an
independent expert to provide an opinion on the Scheme in accordance
with the Corporations Law, in particular on the value of the
consideration offered by AMP under the Scheme. The report of the
expert will be included in the shareholder materials forwarded with
the notice convenin0
g the Scheme Meeting.

Mr Mazoudier concluded: "My fellow independent directors, and I,
believe that this proposal is in the best interests of minority
shareholders, customers and staff and that GIO's future is best
secured as part of the AMP group."

Inquiries should be directed to:

Susan Nixon
Director of Marketing and Communications 
GIO Australia Holdings Limited 
Phone:  9255 8078 
Fax:    9251 2084 
Email:  snixon@gio.com.au

Chris O'Hehir 
Group Secretary and General 0
Counsel
GIO Australia Holdings Limited


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