Zurich/London, May 3, 2000. - Further to the announcement of April 17, 2000, the Boards of Zurich Allied and Zurich Financial Services and the committee of the Independent Directors of Allied Zurich confirm that they have now entered into a transaction agreement setting out the terms and conditions of the unification plan. The plan is to simplify and unify the Group structure under a single Swiss holding company, new Zurich Financial Services (the ’Unification’). In the context of the Unification, the Board of Directors of Zurich Allied, at its meeting of May 2, 2000, authorized on-market share repurchases for Zurich Allied shares up to an amount of CHF 1.0 billion.
The Unification includes the following major steps:
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Zurich Allied will seek approval from its shareholders and effect a Swiss statutory merger with new Zurich Financial Services which will leave new Zurich Financial Services as the surviving company.
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Allied Zurich will seek approval from its shareholders and effect a scheme of arrangement whereby the current shareholders of Allied Zurich will have their Allied Zurich shares cancelled and will receive new shares in new Zurich Financial Services on the basis of one new Zurich Financial Services share for every 42.928 Allied Zurich shares.
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new Zurich Financial Services will seek a primary listing on the SWX Swiss Exchange and a secondary listing on the London Stock Exchange. These listings will become effective on completion of the scheme of arrangement of Allied Zurich and the statutory merger of Zurich Allied and new Zurich Financial Services.
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Subject to the satisfaction of the other conditions of the Unification, Allied Zurich shareholders on the register immediately prior to the date on which the scheme of arrangement becomes effective will be entitled to receive a special cash dividend of 40 pence per Allied Zurich share.
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In the context of the Unification, the Board of Directors of Zurich Allied, at its meeting of May 2, 2000, authorized on-market share repurchases for Zurich Allied shares up to an amount of CHF 1.0 billion. Based on the Zurich Allied share price of April 28, 2000, this is equivalent to approximately 2.8 per cent of the outstanding share capital of Zurich Allied. The authorisation has immediate effect and will be valid until December 31, 2000 or, if earlier, until such time as the share repurchases have been completed. The purpose of the share repurchases is to facilitate the management of the flowback resulting from the proposed share unification of the Zurich Financial Services Group. The repurchased Zurich Allied shares will be held as treasury shares and will not be cancelled to reduce Zurich Allied’s share capital. Zurich Allied will not buy back more than 25 per cent of the daily trading volume in Zurich Allied shares on the SWX Swiss Exchange. The repurchases have been exempted from Swiss Takeover Rules by the Swiss Takeover Board.
Notes to editors:
For further information, please refer to the detailed version below.
Introduction
Zurich/London, 3 May 2000. - Further to the announcement of 17 April 2000, the Boards of Zurich Allied and Zurich Financial Services and the committee of the Independent Directors of Allied Zurich confirm that they have now entered into a transaction agreement setting out the terms and conditions of the unification plan. The plan is to simplify and unify the Group structure under a single Swiss holding company, new Zurich Financial Services.
This announcement sets out the terms and conditions for the unification plan and the expected timetable for the shareholder approvals required. A summary of the transaction agreement and conditions of the unification plan is set out in the Appendix. Definitions used in the announcement made on 17 April 2000 have the same meanings in this announcement unless otherwise indicated.
Terms of the unification proposal
To effect the unification, Zurich Allied shares will be cancelled and shares in new Zurich Financial Services issued on a one for one basis pursuant to a statutory merger under Swiss law. Allied Zurich shareholders will receive shares in new Zurich Financial Services pursuant to a scheme of arrangement of Allied Zurich in the UK on the basis of one new Zurich Financial Services share for every 42.928 Allied Zurich shares. Entitlements to fractions of new Zurich Financial Services shares will not be issued but will be aggregated and sold in the market for the benefit of the persons entitled thereto.
Subject to the satisfaction of the other conditions of the unification plan, Allied Zurich shareholders on the register immediately prior to the date on which the scheme of arrangement becomes effective will be entitled to receive a special cash dividend of 40 pence per Allied Zurich share. This dividend is to compensate Allied Zurich shareholders for a variety of factors including the fact that the new Zurich Financial Services shares will not be eligible for inclusion in the FTSE UK indices.
Upon unification, former shareholders of Zurich Allied will hold between them 57% of the shares in new Zurich Financial Services and former shareholders of Allied Zurich will hold between them 43% of the shares in new Zurich Financial Services (subject to the effect of the proposed share repurchase of up to US$1.0 billion by Allied Zurich described in the announcement made on 17 April 2000).
Recommendation by the Independent Directors of Allied Zurich
The Independent Directors of Allied Zurich, and their financial advisers Goldman Sachs International and Cazenove & Co., consider that the unification of Allied Zurich and Zurich Allied into a single Swiss holding company will, in the long term, be beneficial for shareholders in Allied Zurich. Accordingly, the Independent Directors of Allied Zurich, who have been so advised by Goldman Sachs International and Cazenove & Co., consider the unification proposals to be in the best interests of Allied Zurich and its shareholders taken as a whole. In giving their advice, Goldman Sachs International and Cazenove & Co. have relied on the commercial assessments of the Independent Directors of Allied Zurich.
The Independent Directors of Allied Zurich will be unanimously recommending that Allied Zurich shareholders vote in favour of the resolutions to effect the scheme of arrangement to be proposed at the required court meeting and extraordinary general meeting of Allied Zurich. The Independent Directors of Allied Zurich intend to vote in favour of these resolutions in respect of their own beneficial holdings of Allied Zurich shares.
Listings for new Zurich Financial Services shares
New Zurich Financial Services will apply for a primary listing on the SWX Swiss Exchange and a secondary listing on the London Stock Exchange. In addition, new Zurich Financial Services intends to seek a listing on the New York Stock Exchange which is expected to occur in either 2000 or 2001.
New Zurich Financial Services has agreed to put in place arrangements for CREST Depositary Interests to be made available to those Allied Zurich shareholders who elect to have new Zurich Financial Services shares delivered to and held by CREST. Further details of these arrangements will be provided in the formal documentation which is expected to be sent to Allied Zurich shareholders on or around 26 May 2000.
New Zurich Financial Services will comply with the requirements of the Listing Rules of the UK Financial Services Authority relating to the Combined Code currently in force.
Timetable for shareholder and regulatory approvals
The unification requires approval by Zurich Allied and Allied Zurich shareholders and the sanction of a scheme of arrangement of Allied Zurich by the High Court of Justice of England and Wales. It will also be subject to the satisfaction of other conditions, including the obtaining of regulatory approvals, which are set out in the Appendix. The conditions must all be satisfied by not later than 31 December 2000 unless the two parties otherwise agree with the consent of The Panel on Takeovers and Mergers (the ’Panel’).
The agenda for the Annual General Meeting of Zurich Allied to be held on 25 May 2000 was sent to Zurich Allied shareholders as of 2 May 2000. Further information on the unification plan will be dispatched soon thereafter. At the Annual General Meeting, Zurich Allied shareholders will be asked to approve the statutory merger of Zurich Allied and new Zurich Financial Services.
The formal documentation to effect the scheme of arrangement of Allied Zurich is expected to be sent to Allied Zurich shareholders on or around the date of the Annual General Meeting of Allied Zurich on 26 May 2000. It is intended that the required Court meeting and related extraordinary general meeting will be held on or around 20 June 2000.
In conjunction with the unification, Allied Zurich will seek shareholder approval for a repurchase of its shares by way of a tender offer of up to US$ 1.0 billion.
Once regulatory approvals have been obtained and all other conditions met (but before completion of the unification), the special cash dividend of 40 pence per Allied Zurich share will be declared by the board of Allied Zurich and paid shortly after completion of the unification.
Subject to receipt of regulatory approvals, it is expected that the unification will be completed before the end of this year.
Zurich Allied share repurchases
At its meeting on 2 May 2000 the Board of Directors of Zurich Allied authorised on-market share repurchases for Zurich Allied shares up to an amount of CHF1.0 billion. Based on a Zurich Allied share price of CHF733 per share on 28 April 2000, this is equivalent to approximately 2.8 per cent of the outstanding share capital of Zurich Allied. The authorisation has immediate effect and will be valid until 31 December 2000 or, if earlier, until such time as the share repurchases have been completed.
The purpose of the share repurchases is to facilitate the management of the flowback resulting from the proposed share unification of the Zurich Financial Services Group. The repurchased Zurich Allied shares will be held as treasury shares and will not be cancelled to reduce Zurich Allied’s share capital. Zurich Allied will not buy back more than 25 per cent. of the daily trading volume in Zurich Allied shares on the SWX Swiss Exchange.
The repurchases have been exempted from Swiss Takeover Rules by the Swiss Takeover Board. Under The City Code on Takeovers and Mergers (the ’City Code’) as well as under the Swiss Takeover Rules, Zurich Allied will be required to disclose the number of Zurich Allied shares repurchased by it or any of its subsidiaries by 12.00 noon (London time) on the business day following each such repurchase.
Disclosure requirements
The announcement made on 17 April 2000 commenced an offer period for the purposes of the City Code which is published and administered by the Panel. An offer period is deemed to commence at the time when an announcement is made of a proposed or possible offer, with or without terms. Allied Zurich and Zurich Allied have equity securities traded on the London Stock Exchange and the SWX Swiss Exchange respectively. The Panel has requested that certain UK dealing disclosure requirements that arise in an offer period be drawn to the attention of member firms of the SWX Swiss Exchange, who should in turn advise their clients accordingly.
The disclosure requirements are set out in Rule 8 of the City Code. In particular Rule 8.3 requires public disclosure of dealings during an offer period by persons who own or control, or who would as a result of any transaction own or control, directly or indirectly, 1 per cent or more of any class of relevant securities of the offeror or offeree company. Relevant securities include all instruments exchangeable into Allied Zurich shares or into Zurich Allied shares. In the case of the proposed unification this requirement will apply until the date that Allied Zurich shareholders vote on the scheme of arrangement.
Disclosure should be made on an appropriate form before 12 noon (London time) on the business day following the date of the dealing transaction. These disclosures should be sent to the Company Announcements Office of the London Stock Exchange (fax number: +44 20-7588-6057) and to the Panel (fax number: +44 20-7256-9383).
The Panel requests that member firms advise those of their clients who wish to deal in the relevant securities of Allied Zurich and/or Zurich Allied, whether in the UK or Switzerland, that they may be affected by these requirements. If there is any doubt as to their application, the Panel should be consulted (telephone number +44 20-7638-0129, fax number +44 20-7638-1554).
Advisers
In connection with the proposed unification, Zurich Financial Services and new Zurich Financial Services are being advised by UBS Warburg, the committee of the Independent Directors of Allied Zurich is being advised by Goldman Sachs International and Cazenove & Co. and Zurich Allied is being advised by Morgan Stanley & Co. Limited.
Cazenove & Co. and Credit Suisse First Boston (Europe) Limited are acting as joint brokers to Allied Zurich.
UBS Warburg, Goldman Sachs International, Cazenove & Co., Morgan Stanley & Co. Limited and Credit Suisse First Boston (Europe) Limited, which are all regulated in the United Kingdom by The Securities and Futures Authority Limited, are acting exclusively for their respective clients and no-one else in connection with the unification of Allied Zurich and Zurich Allied and will not be responsible to anyone other than their respective clients for providing the protections afforded to their respective customers, or for giving advice in relation to the unification of Allied Zurich and Zurich Allied.
Other
The new Zurich Financial Services shares to be issued pursuant to the scheme of arrangement and the statutory merger have not been and will not be registered under the United States Securities Act of 1933 (as amended) nor under the securities laws of any state of the United States. This announcement shall not constitute an offer to sell or the solicitation of an offer to buy any securities in the US or any jurisdiction thereof. Similar restrictions apply to other jurisdictions, such as Germany, Australia, Canada and Japan.
This announcement does not constitute an offer or an invitation to acquire any securities.
As at 27 April 2000 (the latest practicable date prior to this announcement), Allied Zurich and Zurich Allied held no shares in Allied Zurich or any options to purchase or any derivatives referenced to such shares. As at the same date, Zurich Financial Services, Zurich Insurance Company, Farmers Group Inc., Allied Zurich Holdings, Zurich Financial Services (UKISA) Limited, Eagle Star Holdings Limited, Threadneedle Asset Management Limited and Allied Dunbar Assurance Limited and the members of the groups of which the financial advisers to Zurich Allied and new Zurich Financial Services form a part held a total of 5,509,781 shares in Allied Zurich.
As at 27 April 2000 (the latest practicable date prior to this announcement), members of the groups of which the financial advisers to Zurich Allied and new Zurich Financial Services form a part held no options to purchase Allied Zurich shares and no derivatives referenced to Allied Zurich shares.
No enquiries have been made of any other members of the Zurich Financial Services Group who may be deemed by the Panel to be acting in concert with Zurich Allied or new Zurich Financial Services for the purposes of the unification plan. Following this announcement, further enquiries will be made and a further announcement may be made in due course if required by the Panel.
Responsibility statement
The Directors of Allied Zurich, Zurich Allied and new Zurich Financial Services accept responsibility for the information contained in this announcement. To the best of the knowledge and belief of the Directors of Allied Zurich, Zurich Allied and new Zurich Financial Services (who have taken all reasonable care to ensure that such is the case), the information contained in this announcement for which they are responsible is in accordance with the facts and does not omit anything likely to affect the import of such information.
Independent Directors of Allied Zurich
The Independent Directors of Allied Zurich comprise Lord Cairns, R.E.J. Gilmore, V.L. Sankey, G.Schulmeyer and C.K. Yeutter. None of the Independent Directors of Allied Zurich have participated nor will they participate in any of the deliberations of the Zurich Allied Board in relation to the unification proposals.
Appendix
Summary of the transaction agreement and conditions of unification
Transaction agreement
The following is a summary of the main points of the transaction agreement (the ’Agreement’) between Zurich Allied, Allied Zurich, Zurich Financial Services and new Zurich Financial Services governing the unification of Zurich Allied and Allied Zurich under a single holding company:
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the parties agree to unify Zurich Allied and Allied Zurich under a single holding company;
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the unification will be effected by a statutory merger of Zurich Allied and new Zurich Financial Services, as well as by a scheme of arrangement involving Allied Zurich (the ’Scheme’);
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unification shall occur by 31 December 2000, unless the two parties otherwise agree with the consent of the Panel;
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the parties will ensure that Allied Zurich has sufficient distributable reserves and funds to declare and pay the special cash dividend of 40 pence and engage in a share repurchase of up to US$1.0 billion;
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new Zurich Financial Services agrees to maintain listings on the Swiss and London Stock Exchanges and to maintain CREST Depositary Interests in the UK;
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new Zurich Financial Services will take the name ’Zurich Financial Services’ after completion, will be domiciled in Switzerland and will have a capital structure, articles and a board of directors as described in the Agreement;
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the Scheme and the merger agreement between Zurich Allied and New Zurich Financial Services will be completed at the same time such that either the Scheme and the statutory merger will both be completed or neither will; and
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the Agreement is governed by Swiss law.
Conditions contained in the Agreement
The Agreement is conditional upon:
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the Scheme being approved by a majority in number representing three-fourths in value of the Allied Zurich shareholders present and voting, either in person or by proxy, at the required Court meeting;
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the passing without material amendment at the Extraordinary General Meeting of Allied Zurich of all necessary enabling resolutions to allow the recommended proposals for a share repurchase of up to US$ 1.0 billion of Allied Zurich ordinary shares, payment of a special cash dividend of 40 pence per Allied Zurich share and for Allied Zurich to become a subsidiary of New Zurich Financial Services pursuant to the Scheme (the ’Proposals’);
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the sanction of the Scheme and confirmation of the reduction of capital by the Court having been obtained without any requirement for onerous undertakings not provided for in the Agreement;
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the statutory merger of Zurich Allied and new Zurich Financial Services and the dissolution of Zurich Allied without liquidation being approved by the members of Zurich Allied at its annual general meeting;
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SWX Swiss Exchange having agreed to the primary listing and the UK Listing Authority having agreed to the secondary listing of new Zurich Financial Services shares and the London Stock Exchange agreeing to admit shares in New Zurich Financial Services to trading subject to completion of the unification;
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all necessary or desirable regulatory or administrative approvals as well as third party consents (including those relating to the asset management activities) in connection with the Proposals being obtained in a form and terms satisfactory to Allied Zurich and Zurich Allied and all applicable waiting periods having expired, except to the extent waived by agreement between Allied Zurich and Zurich Allied;
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Inland Revenue clearance and confirmation in connection with Capital Gains Tax rollover for Allied Zurich shareholders in respect of receipt of new Zurich Financial Services shares being obtained and not being withdrawn or ceasing to be available;
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all necessary consents, approvals or resolutions to give effect to the statutory merger between Zurich Allied and new Zurich Financial Services being obtained or passed in a form and terms reasonably satisfactory to Allied Zurich and Zurich Allied;
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new Zurich Financial Services having the characteristics set out in the schedules to the Agreement;
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the statutory merger of Zurich Allied and new Zurich Financial Services having become unconditional; and expiry or termination of any administrative or court ordered prohibitions of consummation or waiting period, if failure to comply with these would, in the view of the parties, have unacceptable consequences for one or all parties.
