Axa Mony Essay

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Case: AXA MONY Question 1: Why is AXA bidding for MONY? Does the deal make sense for AXA; for MONY shareholders; for mgmt? As a MONY shareholder, what are your concerns about the deal? For AXA • Growth: Horizontal merger, AXA’s sales force in US by 25% → hard to achieve organically • Cross-marketing → Distribution systems complementary, and products (AXA strong in the variable annuity marketplace and having some new life products that could be offered by MONY’s sales force) • Bidder share price increased following the announcement; looks like the market is positive as well. For MONY • Poor performance in 01-02, ROE of 1% compared to industry of 10%, valid argument? HIG JHF MET PRU UNM MONY Net income -91 806 2,196 1,085 -386 37 Equity 11,639 8,216 21,149 21,292 7,271 2,094 ROE -0.8% 9.8% 10.4% 5.1% -5.3% 1.8% • The whole life incurance sector had been in trouble • MGMT forecasted EPS of 4, analysts said 30-35 cents • Low performance since demutualization → They criticized the deal, claiming it was undervalued (Delaware courts etc) (share price above bid price they claimed) For management? • General change In control Contracts (CICs) → would compensate top mgmt. and some board members in a takeover (6% of the value of the deal) • Hard to turn around negative profits without major changes Concerns about the deal? • MGMT CICs made mgmt. agree to easily for the deal → maybe invite to an auction to increase price? (Disadvantages: 1. who will buy the company? Maybe not a strategic buyer 2. If the auction does not go through? -> “damaged goods” hurting valuation) • The belief of a industry turning around, selling the company at rock bottom Question 2: How did AXA finance the takeover bid? Explain the structure AXA used. Why did AXA use this structure? What effects, if any, do you think this method of financing has on the

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