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QBE Insurance kept the market wondering Monday, and then extended its suggested offer for the proposed takeover of Insurance Australia Group by another two weeks.

QBE’s proposal of 0.142 QBE shares and 70 cents cash for each IAG share was due to expire at 5 pm Monday. There was no news of an extension, leading to some reports of it expiring, while other reports suggested a statement would come today.

Which it did: although you would expect it would have been just as easy to have extended the offer on Monday evening. The delay seems to have been a tactic to add pressure to shareholders.

The unsolicited and incomplete offer, which has been rejected by the IAG board as inadequate, will now expire on May 19, if it isn’t extended again by QBE.

It’s the second extension BY QBE, which needs to convert the bid from hostile to one recommended by the board because of the large number of small shareholders.
QBE chief executive Frank O’Halloran said in the statement that IAG shareholders needed more time to consider the ramifications of a profit downgrade announced by IAG last week.

“QBE remains interested in seeing through a friendly merger with the recommendation of IAG’s board,” he said, which is recognition that the IAG board holds the whip hand right now.

At the market close Monday, the offer valued IAG at $4.33 per share or $8.13 billion. IAG shares ended Monday and yesterday at $4.36.QBE shares fell 27 cents to $25.30, which values IAG at $4.29.

“QBE reserves the right to extend the period during which it is will to discuss the proposal with IAG,” the company said.

Meanwhile, QBE said in a separate announcement that it was buying new distribution channels in five separate transactions. The details of just what companies were being acquired, wasn’t disclosed in the QBE statement.

“They will be earnings-per-share accretive in year one,” Mr O’Halloran said.

QBE said the acquisitions are expected to produce additional net written premium of about $200 million and incremental insurance pre-tax profit of about $70 million in the 2009 financial year.

The purchases would be funded from existing resources.

Mr O’Halloran said the acquisitions would secure the group’s existing businesses in Australia and the US.

The O’Reilly family’s APN News And Media Ltd says its revenues and profit for the calendar year so far are ahead of last year.

“The board noted that for the year to date, revenues and profit were ahead of the prior year in challenging market conditions,” the retiring chairman, James Parkinson told shareholders yesterday at the AGM.

“Assuming such conditions do not deteriorate, the board expects that APN’s broad range of high quality media assets to again perform satisfactorily in 2008.”

A broadly general forecast that left shareholders none the wiser as to the extent of the improvement. They would have preferred at least some numerical estimate of the improvement for the Australasian regional newspaper publisher, radio operator and outdoor advertising group.

The outlook for New Zealand’s economy is looking more problematic by the month as house prices and sales ease, bank lending drops and exports slow.

The market reacted adversely to the unclear guidance, marking down the shares to $4.06, a fall of around 3% or 14 cents. They touched a day’s low of $3.93, which is actually a 52 week low.

That compares to the $6.20 a share on offer in 2007’s rejected buyout from the O’Reilly family interests and Providence Partners, a US private equity group based in New York.

APN made a net profit of $167.4 million in calendar 2007, up 5% on the previous year.

Mr Parkinson, who retired after the meeting and is being replaced by Gavin O’Reilly, noted that it was business as usual for the group, which is involved in publishing, broadcasting and online advertising in Australia and New Zealand, despite the ongoing tightness in global credit markets.

“APN is well placed to withstand continued volatility having re-negotiated credit facilities in October 2006, well prior to this deterioration,” he said.

The company has no material debt maturities until 2010, with some maturities extending to 2012.

“Furthermore, the limited amount of current interest bearing liabilities in the balance sheet are covered by existing credit lines and surplus cash,” he said.

“APN’s overall debt levels remain reasonable, allowing us ample capacity to fund strategic growth opportunities should they arise.”

Mr Parkinson also told shareholders that their rejection of an offer from Independent News & Media plc to take over the company had been the right one.

“As a company, we have moved on,” he said.

“It is up to individual shareholders to judge whether the decision by some to reject the $6.20 per share proposal was justified.

“However, the subsequent events in the market certainly show that the decision to recommend the proposal to shareholders was the right one.”

The takeover was rejected because 75% of APN’s shares didn’t vote in favour. The O’Reilly interests were excluded from the vote.

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