GE Capital makes an unsolicited offer to acquire Kemper Corp

GE Capital makes an unsolicited offer to acquire Kemper Corp

GE Capital Corp. (Fairfield, CT) has made an unsolicited offer to acquire Kemper Corp., (Long Grove, IL) for $55.00 per share in cash, or almost $1.8 billion for all of its 32.723 million common shares outstanding. Kemper immediately rejected the of, and GE said it might sweeten its bid if it could obtain more information about Kemper’s troubled real estate holdings.

Kemper’s stock price soared 39.5%, from $40.875 per share to $57.00 per share, at the announcement. It rose another 8.3% the next day, to $61.75 per share, indicating that Wall Street is expecting either a sweetened offer or another suitor to increase the price to at least $62 per share.

The GE bid is what Wall Street calls a “bear hug”, an unsolicited takeover offer which the buyer makes public to put pressure on the target company’s board of directors. While unfriendly takeovers are rare in the financial services business, this appears to be the exception. GE Capital wants to expand its mutual fund and money management businesses, and Kemper Corp. has over $70 billion under management. Kemper would be the flagship of out major thrust into the asset management business, says General Electric’s chairman John F, Welch.

GE’s strategy is aimed at Kemper’s May 11th annual meeting. About 70% of Kemper’s shares are held by institutions, for whom the $55.00 per share price represents a hefty profit, and for whom the prospect of a sweetened bid is even more attractive. GE went public at this time with its bid to convince shareholders, especially the institutions, to lean on their board to accept the offer. At this point, there is still time for GE recommend a new slate of directors at the annual meeting, a fact which has been pointed out to Kemper’s board.

Among the savvy investors currently holding stock in Kemper are hedge fund managers George Soros and Michael Steinhart and investor Leon Cooperman of Omega Advisors.

Kemper has been restructuring, in an effort to minimize its bad real estate holdings. In 1993, it sold most of its property and casualty insurance holdings, including its reinsurance and risk management units to their former parent, Lumbermens Mutual Casualty Co. in a stock transaction valued at more than $600 million. But coming into 1994, its stock still lagged behind the stocks of other financial services companies.

Analysts say the company’s main problems have been its real estate portfolio and in its brokerage operation, The company’s 1993 income is expected to be $235.5 million, including losses on discontinued operations, indicating that its troubles are clearing up. It tried sell its brokerage unit, Kemper Securities, last summer, but there were no takers, and Kemper still owns the subsidiary.

With all this talk about asset management, we tend to forget that Kemper is an insurance company. Its two main insurance units, Federal Kemper Life Assurance Co. and Kemper Investors Life Insurance Co. together reported $829.8 million in life insurance and annuity premiums in 1993.

Copyright Quality Services Company Mar 21, 1994

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