"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. 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."
Summary
Zurich/London, April 17, 2000. - The Boards of Zurich Allied and Zurich Financial Services and the committee of the Independent Directors of Allied Zurich (together the "Group") announce today that they have reached agreement in principle on the terms of a plan to simplify and unify the Group structure under a single Swiss holding company. It is envisaged that the new company, which following completion will take the name "Zurich Financial Services" ("new Zurich Financial Services"), will apply for a primary listing on the Swiss Stock Exchange and a secondary listing on the London Stock Exchange.
The unification plan will involve the statutory merger of Zurich Allied with new Zurich Financial Services, and the combination of Allied Zurich and new Zurich Financial Services under a scheme of arrangement. Upon unification, it is expected that former shareholders of Zurich Allied will hold 57% of the shares in new Zurich Financial Services and former shareholders of Allied Zurich will hold 43% of the shares in new Zurich Financial Services (subject to the effect of the share repurchase referred to below).
It is intended that Allied Zurich shareholders will 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, being shares of a Swiss based company, will not be eligible for inclusion in the FTSE UK indices.
In conjunction with the proposed unification, the directors of Allied Zurich intend to seek shareholder authorisation for an Allied Zurich share repurchase by way of a tender offer of up to US$ 1 billion.
The Boards of Zurich Allied and Allied Zurich believe that unification of the share structure will enhance long term value for all shareholders by:
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enhancing strategic flexibility in a rapidly consolidating industry
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simplifying capital raising
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reducing complexity for investors and analysts
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increasing the liquidity of new Zurich Financial Services shares
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eliminating the difference between the trading prices of Allied Zurich and Zurich Allied shares relative to the values implied by the Equalisation Ratio
In addition, it is expected that a unified share structure will more readily facilitate the Group’s previously announced intention to seek a listing on the New York Stock Exchange.
Completion of the unification is expected before the end of the year.
Comments
Rolf Hüppi, Chairman of Zurich Allied and Chairman and CEO of the Zurich Financial Services Group, commented: "The intent of this plan is to maximize strategic flexibility, reduce the complexity associated with the current dual headed structure and simplify capital raising. Overall, we strongly believe that this will create long term value for all shareholders and positions the company to play a leading role in this globally consolidating industry."
Lord Cairns, Chairman of Allied Zurich and of the committee of the Independent Directors of Allied Zurich said: "Much has been achieved but it has become apparent that the dual headed structure put in place at the time of our merger no longer serves the best interests of a Group operating in an industry of rapid structural change. The current environment requires a simple and flexible structure, which these proposals can achieve."
Zurich Financial Services Group
Plan to unify Zurich Allied AG and Allied Zurich p.l.c. into a single Swiss holding company
Introduction
Zurich/London, 17 April 2000. - The Boards of Zurich Allied AG ("Zurich Allied") and Zurich Financial Services (together the "Group") and the committee of the Independent Directors of Allied Zurich p.l.c. ("Allied Zurich") announce today that they have reached agreement in principle on the terms of a plan to simplify and unify the Group structure under a single Swiss holding company. However, there is no guarantee that any such proposals will be put to shareholders of Allied Zurich and Zurich Allied and a further announcement will be made in due course. It is envisaged that the new company, which following completion will take the name "Zurich Financial Services" ("new Zurich Financial Services"), will apply for a primary listing on the Swiss Stock Exchange and a secondary listing on the London Stock Exchange.
The present Zurich Financial Services holds all the business entities of the Group and its share capital is currently owned 57% by Zurich Allied and 43% by Allied Zurich, such relative ownership percentages being the "Equalisation Ratio". Upon unification, it is expected that former shareholders of Zurich Allied will hold 57% of the shares in new Zurich Financial Services and former shareholders of Allied Zurich will hold 43% of the shares in new Zurich Financial Services (subject to the effect of the share repurchase below).
Indicative terms
To effect the unification, Zurich Allied shares will be exchanged for shares in new Zurich Financial Services 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.
It is intended that 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.
The committee of the Independent Directors of Allied Zurich believes that there are significant benefits for Allied Zurich shareholders in unifying the two holding companies. It has also consulted certain major UK institutional shareholders, who have indicated their support for the plan.
Background to, and reasons for, the unification proposals
The dual holding company structure was set up in September 1998 at the time of the merger creating Zurich Financial Services. Since inception, Zurich Allied shares have traded at an average premium of 12.6% to the Allied Zurich shares relative to the values implied by the Equalisation Ratio.
The unification will eliminate the difference between the trading prices of Allied Zurich and Zurich Allied shares relative to the values implied by the Equalisation Ratio. Based on closing share prices as at 14 April 2000 of 684 pence per Allied Zurich share and CHF827 per Zurich Allied share, Zurich Allied shares are trading at a premium of 7.8% to the Allied Zurich shares relative to the values implied by the Equalisation Ratio.
In addition, the Boards of Zurich Allied and Allied Zurich believe that unification of the share structure will enhance long term value for all shareholders by:
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enhancing strategic flexibility in a rapidly consolidating industry
-
simplifying capital raising
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reducing complexity for investors and analysts
-
increasing the liquidity of new Zurich Financial Services shares
In addition, it is expected that a unified share structure will more readily facilitate the Group’s previously announced intention to seek a listing on the New York Stock Exchange.
Proposed board, dividend policy and corporate governance of new Zurich Financial Services
New Zurich Financial Services will have one board of directors consisting of the directors of Allied Zurich and Zurich Allied who are in office following this year’s annual general meetings with the exception of Lord Cairns, the current Chairman of Allied Zurich, who has indicated his intention to retire following completion of the unification, and Martin D. Feinstein and Alexander P. Leitch, both of whom will continue their management roles within the Group. Rolf Hüppi will be the Chairman and Chief Executive Officer of new Zurich Financial Services.
It is proposed that, following unification, the Group should maintain its current dividend policy and standards of governance. In particular, the committee structure, comprising audit, remuneration and nominations committees, will remain in place with the same remit as at present. In addition, new Zurich Financial Services would propose to continue complying with the requirements of the Listing Rules of the London Stock Exchange relating to the Combined Code.
Anticipated selling and buying activity
The unification of the dual holding company structure under a single Swiss company is likely to lead to increased trading activity in the Allied Zurich and Zurich Allied shares from now until several weeks after completion.
Since new Zurich Financial Services will not be included in the major UK stock market indices, it is anticipated that a number of Allied Zurich shareholders may sell their Allied Zurich shares or the new Zurich Financial Services shares received pursuant to the scheme of arrangement. The Group has been advised that, over time, such selling activity will be partially matched by buying activity resulting from the reweighting of new Zurich Financial Services relative to Zurich Allied in major European and Swiss indices.
In addition, in conjunction with the unification plan, Allied Zurich intends to seek authority from its shareholders for a share repurchase of up to US$1.0 billion. It is expected that the buyback will be conducted through a tender offer in which all Allied Zurich shareholders will be entitled to participate. The board of Zurich Financial Services has been advised that the proposed tender offer will further offset some of the selling pressure identified above.
Subject to authorisation by Allied Zurich shareholders, the tender offer is likely to be conducted in one or two tranches, at least one of which is expected to close immediately prior to the date on which the unification completes and the Allied Zurich shares are no longer included in the major UK indices.
Warburg Dillon Read has been appointed as adviser to new Zurich Financial Services and will coordinate the selling and buying activity associated with the unification plan and to act as tender agent in the share repurchase.
Financing of the special cash dividend and share repurchase
Initial funding of the special cash dividend and share repurchase will be through internal resources and credit facilities. In the longer term, the financing will be reviewed with the objectives of optimising the capital structure and maintaining the strong capitalisation of the Group.
Timetable and shareholder and regulatory approvals
The unification will require approval by Zurich Allied and Allied Zurich shareholders and the sanction of the 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 approval.
Following agreement on the detailed terms of the unification by the boards of Allied Zurich and Zurich Allied, it is expected that documentation summarising the background to, and reasons for, the unification will be sent to Allied Zurich and Zurich Allied shareholders as soon as is practicable. At the same time, formal documentation relating to the unification proposals and notices convening the relevant meetings will be sent to Allied Zurich shareholders.
Subject to the UK Court timetable, it is intended that the Court meeting to consider the scheme of arrangement will be held immediately after Allied Zurich’s annual general meeting on 26 May 2000 or at a meeting convened for this purpose at a later date. It is intended that Zurich Allied shareholders will be asked to approve the statutory merger of Zurich Allied and new Zurich Financial Services at the Zurich Allied general meeting on 25 May 2000.
Subject to regulatory approvals, it is expected that the unification would, if the proposals are pursued, be completed before the end of the year.
Once regulatory approvals have been obtained and all other conditions met (but before completion of the unification), it is expected that 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.
Further listings of, and dealing arrangements for, new Zurich Financial Services shares
The new Zurich Financial Services shares will be listed on the Swiss Stock Exchange and the London Stock Exchange.
In addition, new Zurich Financial Services intends to put in place arrangements for the new Zurich Financial Services shares issued to Allied Zurich shareholders in the UK to be delivered and held by CREST (at the election of the shareholder) by means of the CREST International settlement link service and the link with SIS, the Swiss settlement system. CREST Depositary Interests ("CDIs") will be issued to either CREST participant members or, in the case of shareholders who do not hold their shares through a CREST participant member, to Lloyds TSB Registrars who will hold the CDIs on their behalf.
The CDIs are expected to have the following benefits:
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New Zurich Financial Services will make arrangements for an organised market to be made for the CDIs
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Quoted in sterling
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Dividends will be paid in sterling (or CHF, US$ or Euros if desired)
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All costs associated with the CDIs for private shareholders will be paid by new Zurich Financial Services
New Zurich Financial Services is currently seeking to make arrangements for shareholders holding CDIs to vote and attend general meetings in the same manner as holders of New Zurich Financial Services shares.
New Zurich Financial Services intends to seek a listing on the New York Stock Exchange either in 2000 or 2001.
Disclosure requirements
This announcement commences an offer period for the purposes of The City Code on Takeovers and Mergers (the "City Code") which is published and administered by The Panel on Takeovers and Mergers (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 Swiss Stock 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 Swiss Stock 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 Warburg Dillon Read, 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. Warburg Dillon Read will also coordinate the selling and buying activity associated with the unification plan and will act as tender agent in the share repurchase.
Cazenove & Co. and Credit Suisse First Boston (Europe) Limited are acting as joint brokers to Allied Zurich.
Warburg Dillon Read, Goldman Sachs International, Cazenove & Co. and Morgan Stanley & Co. 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.
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.
