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Sovereign's Coon and Hendry say they'll se

An independent appraisal says ASB Bank's forthcoming bid for Sovereign is fair.

Wednesday, October 28th 1998, 12:00AM

by Philip Macalister

ASB Bank's forthcoming bid for Sovereign received a double fillip yesterday with founders Chris Coon and Ian Hendry announcing they will be accepting the bank's $2.25 a share bid. Also Sovereign's non-executive directors confirmed they will be recommending the bid to shareholders.
Their recommendation is based on an independent assessment appraisal prepared Grant Samuel & Associates which values the Sovereign's shares in a range of $2.10 and $2.31 each.
Sovereign's non-executive directors say that "under the present shareholding situation, Sovereign was likely to need additional capital."

"In the current economic environment raising capital to fund acquisitions was more difficult," they say.
Grant Samuel's valuation is based on an appraisal valuation method that is becoming the generally accepted method of valuing life companies in Australia and the United Kingdom.
Sovereign has been a valued on lower multiple than those used in Australia and the UK because superannuation fund flows are lower here, and similar companies in Australia and the UK have significant scope to further reduce operating
It paints a picture which shows that Sovereign was being, to a degree, marginalised as the merger and acquisition activity continues amongst its competitors.
To grow it requires either more capital or a being taken over, as is being proposed.
Grant Samuel indicates ASB is the only bidder at this stage. Other potential suitors have looked at the business (Good Returns understands most big life offices in New Zealand have 'kicked the tyres' on Sovereign), however none intend making an offer.
"A number of international institutions have declined the opportunity (to acquire Sovereign) due to the comparatively small size of the New Zealand market, opportunities elsewhere New Zealand's poor economic performance," Grant Samuel says.
If the ASB bid is unsuccessful Sovereign shares are likely to trade at less than the $2.25 bid price.
ASB, through subsidiary ASB Life, is seeking a minimum of 90 per cent of Sovereign (Hendry and Coon's combined stake is about 22 per cent). It intends mailing its offer to shareholders on November 2.
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