Quite a few finance journalists, brokers and analysts should be hanging their collective heads in shame this morning. They have once again allowed QBE and its CEO, Frank O’Halloran, and chairman, John Cloney, to get away with blue murder in their attempts to seduce Insurance Australia Group into its arms.

Most have described the QBE statements purporting to make an offer to IAG as an offer.

It is nothing of the sort. And only The Australian‘s Bryan Frith has got it right from what I can see.

QBE hasn’t made any sort of offer: it is a non-binding indicative proposal to IAG’s chairman James Strong and board, not to shareholders.

QBE yesterday revised this upwards, and let the market know ahead of time by leaking suggestions of a revision through the business media in the morning papers. But there was no actual offer capable of being put to shareholders, just as in the two previous cases when it first revealed the proposal and then purported to extend it twice.

It’s all smoke and mirrors and because there’s no actual offer. What QBE says doesn’t matter. It can alter, vary, change or do what it likes to its proposal: it certainly can walk away when IAG says “no” officially and later today after a board meeting in New Zealand.

After all, you can’t declare as “final” a bid that hasn’t actually been made in terms of the Takeovers Code.

What QBE wants is to get IAG to say yes to the discussions, then to roll over and agree to whatever QBE then formalises into an actual legal offer. Journalists and brokers who don’t understand that hould go back and re-read the QBE releases and reflect on their omissions.

If, for example QBE changed the terms of the proposal in its first legal offer, as it could do presently, the same journalists would be bagging IAG board for rolling over.

The QBE proposal is opportunistic, just as the Westpac offer for St George is an attempt to grab an asset on the cheap, without an auction or any price pressure on the acquirer.

In a year’s time IAG will be doing better because the insurance cycle will be moving back towards an upswing. QBE knows what’s going on in the insurance market: it knows there are parts of its business that are having problems, just like IAG.

But the IAG board is well within its rights to demand that QBE show them the money in the form of an actual offer capable of being put to shareholders.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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