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 +++++++++++++++++++++++++ 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 MORE TO FOLLOW 1