RNS Number:8869F
Norwich Union PLC
CGU PLC
21 February 2000
Part 1
MERGER OF CGU AND NORWICH UNION
The Boards of CGU and Norwich Union announce that
they have agreed the terms of a merger of the two
companies to create CGNU. CGNU will be the
UK's largest insurance group with strong
positions in Europe and other international
markets. The combined group will have the scale and
financial strength to capitalise on growth
opportunities in the long-term savings markets.
CGU also announces its intention to dispose of its
property and casualty business in the US.
CGNU will be:
* the UK's largest insurance group, with worldwide
premium income and retail investment sales of
#26 billion
* the second largest writer of new life and
pensions business in the UK with a diversified
approach to distribution incorporating IFAs,
financial institutions, agents and direct
* a top five European life insurer, based on
premium income, with leading positions in the
UK, France, the Netherlands, Ireland and Poland in
addition to a strengthened presence in other
European markets
* a significant asset management business with in
excess of #200 billion of assets under management.
CGNU will be the second largest UK-based fund
manager by reference to funds under management
* the largest provider of general insurance in the
UK with a focus on personal lines and small
commercial business
* a group with leading positions in a number of
other general insurance markets
* a group committed to the development of innovative
internet and e-commerce applications across its
businesses
The Merger is expected to generate at least #250
million in annualised pre-tax cost savings within
18 months of completion of the Merger, to be
delivered by a management team with a proven track
record of successful integration.
CGNU intends to be the leader in its core markets
in the UK and one of the leaders in the
European financial services industry. Its strategy
is to:
* grow its long-term savings business aggressively
and profitably, capitalising on demographic
changes, the growing emphasis on private provision
for retirement and the rapid growth in demand
for retail investment products
* continue to build a world class asset management
business
* have a focused approach to personal and small
commercial lines general insurance with an
emphasis on disciplined underwriting and efficient
claims handling
* build top 5 positions in each of its chosen markets,
both by growing the business organically and by
capitalising on consolidation opportunities that
create shareholder value. The leading domestic
position and financial strength of the combined
group will be significant advantages in achieving
this objective
* withdraw from lines of business or markets
where management does not believe there are good
prospects for achieving leading market positions or
superior returns
Following the Merger, and after the intended disposal
of CGU's US property and casualty operations, the
long-term savings business will account for 62 per
cent. of CGNU's pro forma 1999 premium income and
retail investment sales (or 56 per cent. before
the disposal) and 71 per cent. of its pro forma 1999
modified statutory operating profits before corporate
and other activities (or 64 per cent. before the
disposal). The Directors of CGU and Norwich Union
expect that CGNU will be classified in the FT-SE
life assurance sector following completion of the
Merger.
The Board of Directors of CGNU will be drawn from the
Boards of CGU and Norwich Union. Pehr Gyllenhammar
will be Chairman and George Paul will be Deputy
Chairman. Bob Scott will become Chief Executive
of CGNU, while Richard Harvey will become Deputy
Chief Executive. It is intended that Bob Scott will
retire by June 2001, at which time he will be
succeeded by Richard Harvey.
CGNU will leverage the existing brands it has in
various countries. It will use the Norwich Union
brand for both life and general insurance in the
UK. The brands to be adopted outside the UK
will be determined by their respective strengths
in local markets.
The combined group's head office will be in London.
The UK life insurance operations will be
headquartered in York and UK general insurance
operations will be headquartered in Norwich. Other
important operating locations, including Perth
and Sheffield, will be maintained. Preliminary
estimates indicate there are likely to be some 5,000
job losses worldwide (out of a total combined
workforce of more than 70,000), of which
approximately 4,000 are likely to be in the UK.
Under the terms of the Merger, CGU Shareholders will
retain their shares in CGU (to be renamed CGNU) and
Norwich Union Shareholders will receive:
for every 100 Norwich Union Shares 48 New CGNU Shares
and so in proportion for any other number of Norwich
Union Shares. Norwich Union Shareholders will remain
entitled to Norwich Union's final dividend of 9.35
pence per share which the Directors will recommend to
shareholders in respect of the year ended 31
December 1999. CGU Shareholders will have the right
to receive CGU's final dividend of 23.75 pence per
share announced today in respect of the year ended 31
December 1999. The New CGNU Shares, to be issued to
Norwich Union Shareholders, will not carry the right
to receive CGU's 1999 final dividend.
The terms of the Merger are based on the recent
relative equity market capitalisations of the two
companies. Following the Merger, CGU Shareholders
will hold approximately 58.5 per cent. and Norwich
Union Shareholders will hold approximately 41.5 per
cent. of the enlarged issued ordinary share capital
of CGNU.
Commenting on the Merger, Bob Scott, Chief Executive
of CGU, said:
"The merger of CGU and Norwich Union will create the
UK's largest insurance group with strong positions in
a number of European and international markets. CGNU
will have the increased scale and financial strength
to capitalise on consolidation opportunities that
create shareholder value. CGNU's management team is
committed to market leadership in each of its core
businesses, delivering profitable growth and
enhancing shareholder value. The management teams at
both CGU and Norwich Union have proven track
records of successful integration and delivering
cost savings."
Richard Harvey, Chief Executive of Norwich Union,
said:
"We believe that this deal will create significant
value for both sets of shareholders not only
through the considerable cost savings and efficiencies
achievable but also through our ability to capitalise
on the significant opportunities for profitable
growth, particularly in the long-term savings
market. The development of CGNU's long-term savings
business will be our key strategic priority."
CGU is being advised by Goldman Sachs International.
Norwich Union is being advised by Dresdner Kleinwort
Benson. Cazenove & Co. and Hoare Govett are joint
brokers to CGU. Cazenove & Co. and Dresdner
Kleinwort Benson are joint brokers to Norwich Union.
This summary should be read in conjunction with the
attached press release.
Enquiries:
CGU (020) 7283 2000 Norwich Union (020) 7269 7188
Bob Scott Richard Harvey
Peter Foster Mike Biggs
Goldman Sachs International (020) 7774 1000
Andrew Chisholm
John Reizenstein
Dresdner Kleinwort Benson (020) 7623 8000
Henry Somerset
Henrietta Baldock
Hoare Govett Cazenove & Co.
(020) 7678 8000 (020) 7588 2828
Peter Meinertzhagen John Paynter
Andrew Thompson Tim Wise
Dresdner Kleinwort Benson
(020) 7623 8000
Jonathan Roe
Maitland (020) 7379 5151
Angus Maitland
Laura Frost
Financial Dynamics(020) 7831 3113
Charles Watson
Alex Child-Villiers
Liddell Thomson (Scotland only) (0141) 221 5775
Colin Liddell
Transaction Press Office (020) 7269 7188
There will be a presentation today to analysts at 9.15
am and to journalists at 12.00 pm. Both will be
held at Stationers' Hall, Ave Maria Lane, London EC4.
Goldman Sachs International, which is regulated in the
United Kingdom by The Securities and Futures
Authority Limited, is acting exclusively for CGU and
no-one else in connection with the Merger and will
not be responsible to anyone other than CGU for
providing protections afforded to customers of Goldman
Sachs International, or for giving advice in relation
to the Merger.
Kleinwort Benson Limited ("Dresdner Kleinwort
Benson"), which is regulated by The Securities and
Futures Authority Limited, is acting exclusively for
Norwich Union and no-one else in connection with
the Merger and will not be responsible to anyone
other than Norwich Union for providing the protections
afforded to customers of Dresdner Kleinwort Benson,
or for giving advice in relation to the Merger.
The New CGNU Shares to be issued pursuant to the
Scheme 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.
MERGER OF CGU AND NORWICH UNION
1. Introduction
The Boards of CGU and Norwich Union announce that
they have agreed the terms of a Merger of the two
companies to create CGNU. CGU also announces its
intention to dispose of its property and casualty
business in the US.
CGNU will be the UK's largest insurance group with
worldwide premium income and retail investment sales
of #26 billion. The group will be the second
largest writer of new life and pensions business
in the UK with a diversified approach to distribution
and will be a top five European life insurer, based
on premium income, with leading positions in France, the
Netherlands, Ireland and Poland. CGNU will have
assets under management in excess of #200 billion
and will be the second largest UK-based fund
manager by reference to funds under management.
The group will also be the largest general
insurer in the UK, with a focus on personal lines
and small commercial business, and have leading
positions in a number of other international markets.
Under the terms of the Merger, CGU Shareholders will
retain their shares in CGU (to be renamed CGNU) and
Norwich Union Shareholders will receive:
for every 100 Norwich Union Shares 48 New CGNU Shares
and so in proportion for any other number of Norwich
Union Shares. Norwich Union Shareholders will remain
entitled to Norwich Union's final dividend of 9.35
pence per share which the Directors will recommend to
shareholders in respect of the year ended 31 December
1999. The record and payment dates of this dividend
will be 14 April 2000 and 14 June 2000
respectively. CGU Shareholders will have the right to
receive CGU's final dividend of 23.75 pence per share
announced today in respect of the year ended 31
December 1999. The record and payment dates of this
dividend will be 10 March 2000 and 17 May 2000
respectively. The New CGNU Shares, to be issued to
Norwich Union shareholders, will not carry the
right to receive CGU's 1999 final dividend.
The terms of the Merger are based on the recent
relative equity market capitalisations of the two
companies. Following the Merger, CGU Shareholders
will hold approximately 58.5 per cent. and Norwich
Union Shareholders will hold approximately 41.5 per
cent. of the enlarged issued ordinary share capital
of CGNU.
Following an extensive review, CGU has concluded that,
despite the scale and strength of its US general
insurance business and its attractive portfolio of
personal and small commercial lines businesses, it
will not be possible to reach a leading position
without a substantial level of investment,
particularly in view of the likely consolidation
in a fragmented market. CGU has therefore decided
to dispose of its US general insurance business
and has appointed Goldman, Sachs & Co. in this
respect.
Following the Merger, and after the intended disposal
of CGU's US property and casualty operations, the
long-term savings business will account for 62 per
cent. of CGNU's pro forma 1999 premium income and
retail investment sales (or 56 per cent. before
the disposal) and 71 per cent. of its pro forma 1999
modified statutory operating profits before corporate
and other activities (or 64 per cent. before the
disposal). The Directors of CGU and Norwich Union
expect that CGNU will be classified in the FT-SE
life assurance sector following completion of the
Merger.
2. Background to and reasons for the Merger
Norwich Union and CGU are both major insurers
operating successfully in the long-term savings and
general insurance markets. The two companies have
complementary strengths in UK life and pensions,
general insurance and in their international
operations. Against the background of increasing
competition and consolidation in the European
financial services industry, both companies recognise
the importance of scale and efficiency in order to
deliver products to customers on a competitive basis
whilst maintaining high standards of service.
The Merger will improve the competitive position of
the combined group as well as generating significant
opportunities for cost savings and improving
operating efficiency.
The Directors believe that CGNU will have the scale
and financial strength to develop its businesses both
organically and by acquisition and to take full
advantage of the expected growth in the UK and other
European long-term savings markets. It will also be
better placed to make significant investments in
important areas such as e-commerce and direct
distribution of savings products.
Strategy
CGU and Norwich Union have each focused on expansion
in the long-term savings markets in the UK and
overseas whilst maintaining profitable general
insurance businesses. This strategic focus will be
enhanced by the Merger.
CGNU intends to be the leader in its core markets in
the UK and one of the leaders in the European
financial services industry. Its strategy is to:
* grow its long-term savings business aggressively and
profitably, capitalising on demographic changes, the
growing emphasis on private provision for
retirement and the rapid growth in demand for
retail investment products
* continue to build a world class asset management
business
* have a focused approach to personal and small
commercial lines general insurance with an
emphasis on disciplined underwriting and efficient
claims handling
* build top 5 positions in each of its chosen markets,
both by growing the business organically and by
capitalising on consolidation opportunities that
create shareholder value. The leading domestic
position and financial strength of the combined
group will be significant advantages in achieving
this objective
* withdraw from lines of business or markets where
management does not believe there are good
prospects for achieving leading market positions or
superior returns
UK life operations
The UK life and pensions market is growing rapidly as
a result of important factors such as the ageing of
the population, the shift towards greater private
provision for retirement and the growth in the demand
for equity related savings products. In line with
this, the expansion of the group's UK long-term
savings business is a key component of CGNU's
strategy.
CGNU's UK life operations will be headquartered in
York and it will distribute its products under the
Norwich Union brand. CGNU will be the second
largest writer of new life and pensions business
in the UK. It will also have pro forma 1999 worldwide
sales of #10,986 million.
CGNU's UK life strategy is to:
* grow revenues. The combined group's enhanced
market profile and larger share of the growing UK
long-term savings market will create a platform
for increased sales. In particular, CGNU will
build on its strengths in retail investment
products under the Norwich Union brand.
* diversify its distribution capability. CGNU's
strong position in the IFA market will be
complemented by a broad range of other
distribution channels. The group will place
increasing emphasis on distribution through
financial institutions and will aggressively
pursue opportunities in e-commerce.
On 26 November 1999, CGU and Royal Bank of
Scotland ("RBS") announced that they had entered
into a memorandum of understanding for the
provision of life, pensions and investment
products by CGU to RBS. In addition, CGU agreed
in principle to acquire a 50 per cent. interest
in RBS's life insurance subsidiary, Royal
Scottish Assurance and, on successful
completion of RBS's offer for National Westminster
Bank plc, expects to be able to start discussions
to acquire a 50 per cent. interest in NatWest
Life. CGNU believes that these joint ventures
will provide access to new and important
distribution channels resulting in additional
value for the shareholders of CGNU.
% of 1999 pro forma
Distribution channel new business
IFA 76%
Partnerships(1) 12%
Direct 12%
(1) Includes financial institutions. Excludes RBSNatWest.
* improve margins. CGNU will be an efficient
provider of life, pension and investment
products. Following the Merger, unit costs are
expected to fall as a result of improved sales
and significant cost reductions. This will be
particularly important in the context of the
shift towards simple lower margin products such
as stakeholder pensions.
Asset management
CGNU will have a significant asset management
business with in excess of #200 billion of assets
under management. It will be the second largest UK-
based fund manager by reference to funds under
management. In the UK, the Norwich Union brand
will be used for retail business while the Morley
brand will be used for institutional business.
CGNU will be among the top ten asset managers
based in Europe, with strong market positions in
France and the Netherlands.
CGNU intends to expand its asset management
business significantly in the UK and
internationally through organic growth and
further selective acquisitions. The prime thrust
of this expansion will be on the retail markets in
the UK and Continental Europe, where high market
growth is expected. CGNU also intends to
accelerate CGU's existing strategy of building
an independent fund management presence under
the Morley brand.
UK general insurance
The Merger creates the largest provider of general
insurance in the UK. CGNU's UK general insurance
operations will be headquartered in Norwich and
will distribute its products under the Norwich
Union brand name. The combined management team is
well placed to integrate the businesses while
maintaining strong focus on customer service,
underwriting discipline and claims management.
CGNU intends to increase profits from its UK general
insurance operations through:
* increased business focus. CGNU will have an
attractive portfolio of personal and smaller
commercial lines businesses. It will concentrate
on those lines which it believes are most likely
to deliver value for shareholders.
CGNU UK 1999 pro forma general insurance premiums
Personal
Motor 29%
Homeowners 25%
Other 10%
___
64%
Commercial
Motor 11%
Property 13%
Liability 5%
Other 7%
___
36%
* lower unit costs. CGU and Norwich Union are
already two of the lowest cost providers in the
general insurance market. The Merger will generate
significant cost savings which will result in
lower unit costs. Further opportunities for
savings will arise from CGNU's greater economies
of scale in claims management, product purchasing
and reinsurance cover.
* diversified distribution. CGNU will continue to
develop strong relationships with brokers, who
will be serviced through an extensive branch
network. CGNU will have a strong direct business
with one of the largest customer bases in the UK
and significant potential to exploit e-
commerce opportunities. The combined group will
also have widespread relationships with
financial institutions and commercial groups.
Europe
CGNU will be one of Europe's top five life insurers
based on premium income, with leading positions in
the UK, France, the Netherlands, Ireland and
Poland in addition to a strengthened presence in
other European markets.
The acquisition of NUTS OHRA in the Netherlands
has significantly improved the position of Delta
Lloyd, CGU's subsidiary in the Netherlands market.
CGU is also progressing discussions with Societe
Generale with the intention of significantly
strengthening its position as a leading player in
the French long-term savings market. The
integration of the Norwich Union business in
France, which is a leader in direct marketing,
will assist this aim.
The Merger will strengthen both companies'
existing presence in the fast growing long-
term savings markets in Ireland, Spain and
Italy. In Germany, CGU's existing life operation
will give CGNU a platform in a market which offers
significant opportunities for growth. CGNU will
have a strong position in the life and pensions
market in Poland and will use its position to
expand in emerging markets in Central and Eastern
Europe. The combined group will also have well
established positions in the general insurance
markets in France, the Netherlands, Ireland and
Spain, which complement the long-term savings
businesses in those countries, as well as
growing health businesses in selected markets.
One of CGNU's primary objectives will be to expand
further in the fast growing long-term savings
markets of Continental Europe. CGNU's leading
domestic position and increased financial
strength will be significant advantages in
achieving this objective.
International
Outside Europe, CGNU will have a significant long-
term savings business in Australia. Norwich
Union has had considerable success in
Australia with Navigator, its fast growing multi
fund product which has a 16 per cent. market
share. CGNU will accelerate the roll-out of this
product in the UK, Italy and Spain. CGNU also
intends to build a platform to enable it to
capitalise on the next phase of profitable growth
in selected emerging markets such as South East
Asia, India and China.
In general insurance, CGNU will have leading
market positions in Canada, Australia and New
Zealand.
Use of technology
CGNU is committed to the use of advanced
technology throughout its business. CGU and
Norwich Union are developing a number of
initiatives, in particular through internet-based
applications, which CGNU believes will offer
significant opportunities to exploit the combined
group's brands, market position and breadth of
customer base. These initiatives encompass both
business-to-business as well as customer-led e-
commerce propositions
Business-to-business applications are expected
to play an important role in achieving improved
customer service and efficiency and to offer the
potential for generating significant cost
savings over time. CGNU plans to make
extensive use of intranet and e-mail systems
which, together with integrated database and
management information systems, are expected to
lead to greater efficiency in a number of
internal operations.
CGNU will adopt a flexible approach to customer
distribution channels, combining face to face IFA
contact with telephone, internet, mobile
technology and interactive TV, as appropriate.CGU
and Norwich Union already operate online
quote services for motor and household insurance
cover and are developing a number of other
customer propositions. Specific proposals
include the parallel development of sophisticated
web-based wealth management vehicles, a dedicated
IFA internet site (which will provide quotes,
training and policy information), a new online ISA
service which will permit investors to purchase
and check valuations on-line and a new digital
TV site, enabling the interactive purchase of
certain ISAs and motor and home insurance cover.
The internet is also expected to play an
important role in the launch of off-shore
investments using the Navigator product.
Potential for cost savings
The Merger is expected to generate substantial
cost savings. The Directors estimate that, in
the absence of unforeseen circumstances,
annualised pre-tax cost savings of at least
#250 million will be achieved for the benefit of
shareholders within 18 months following
completion of the Merger. The management teams
at CGU and Norwich Union each have a proven
track record of successful integration and of
creating value for their shareholders.
The cost savings are expected to be generated as
follows:
Analysis of cost savings
Staff 48%
Property 6%
IT 19%
Other 27%
----
100%
The savings are expected to be achieved primarily
through the elimination of duplicated functions
within the branch and head office operations and
the consolidation of data processing facilities.
Preliminary estimates indicate there are likely
to be some 5,000 job losses worldwide (out of a
total combined workforce of more than 70,000), of
which approximately 4,000 are likely to be in
the UK. Total one-off costs of achieving the
expected savings from the Merger are expected to
amount to approximately #350 million.
The expected cost savings have been estimated on
the basis of the existing costs, operating
structures and business volumes of the two groups
and by reference to current prices, exchange rates
and economic conditions and the current
regulatory environment.
Nothing in this section should be construed
as a profit forecast or be interpreted to mean
that the future earnings per share of CGNU
will necessarily be greater or less than the pro
forma earnings per share of CGNU for the
financial year ended 31 December 1999.
3. Board and management
The new Board of CGNU will comprise 17 directors,
drawn from the Boards of CGU and Norwich Union.
They will be:
Chairman Pehr Gyllenhammar
Deputy Chairman George Paul
Group Chief Executive Bob Scott
Deputy Group Chief Executive Richard Harvey
Group Finance Director Peter Foster
Group Executive Director, Philip Scott
responsible for UK Life
Group Executive Director, Mike Biggs
responsible for UK General
Group Executive Director, Philip Twyman
responsible for Asset Management,
Strategy & International
Group Executive Director, Tony Wyand
responsible for Continental Europe
Non Executive Director Lyndon Bolton
Non Executive Director Guillermo de la Dehesa
Non Executive Director Wim Dik
Non Executive Director Sir Michael Partridge
Non Executive Director Alan Perelman
Non Executive Director Derek Stevens
Non Executive Director Elizabeth Vallance
Non Executive Director Andre Villeneuve
It is intended that Bob Scott will retire by
June 2001, at which time he will be succeeded by
Richard Harvey. Peter Ward will retire as an
Executive Director of CGU following completion
of the Merger. Patrick Snowball, currently an
Executive Director of Norwich Union, will
be Managing Director, UK General Insurance and
Tom Fraser, currently an Executive Director of
Norwich Union, will be Managing Director,
Continental Europe.
The group's head office will be in London. The
UK life insurance operations will be
headquartered in York and the UK general insurance
operations will be headquartered in Norwich. Other
important operating locations, including Perth
and Sheffield, will be maintained.
4. Capital management
CGNU is committed to maximising shareholder value
through the maintenance of an efficient capital
structure consistent with its investment and
development plans and will maintain a
combination of equity shareholders' funds
and external borrowings with the objective
of minimising its overall weighted cost of
capital. CGNU will use Return on Equity and EVA
measures to target and monitor the performance
of each business unit, calculated after making a
risk adjusted charge to each business unit
for the capital employed by its operations.
These targets will be reviewed regularly in the
light of changing market conditions.
CGNU's capital will be maintained at an efficient
level that demonstrates the sound financial
position of its regulated subsidiaries to the
rating agencies and the markets in which they
operate.
In the event that the intended disposal of CGU's
US property and casualty business results in CGNU
holding surplus capital, consideration will be
given to making a return of capital to
shareholders. The amount, form and timing of any
such capital return will depend, amongst other
things, on the net proceeds and timing of the
sale, the prevailing trading conditions and the
status of CGNU's investment and development
plans. The sale is expected to be completed by
the end of 2000.
5. Dividend policy
It is envisaged that CGNU will pay dividends for
the year ending 31 December 2000 in line with
CGU's 1999 dividend. Subsequently, it is
currently expected that CGNU will at least
maintain this level of payment, whilst building
dividend cover to a level appropriate for a
company focused on the long-term
savings sector.
6. With-profit funds
The issue of whether an attribution of the
inherited estate to shareholders is achievable for
certain life assurance companies has received wide
publicity in recent months and was considered
during the discussions leading to the Merger and
the agreement on the share exchange terms. CGU's
policy has been to utilise the inherited estate
within its with-profit funds in order to build
its life insurance business aggressively in
the interests of shareholders.
Following the Merger, CGNU will have three UK
companies with large with-profit funds and will
consider how best to utilise the resources of
each of these funds for the benefit of
shareholders, as well as policyholders, as CGU
and Norwich Union have done in the past. Given
the growth potential of the life insurance
market, CGNU expects to continue to use its
inherited estate to develop its business.
If, however, circumstances should arise in
which shareholders' interests would be better
served by a different policy, then this would be
considered at that time.
7. Structure of the Merger
The terms of the Merger are based on the
recent relative equity market capitalisations of
the two companies.
The Merger is expected to be effected by way of
scheme of arrangement between Norwich Union and
its shareholders under section 425 of the
Companies Act 1985. Under the Scheme, CGU will
issue New CGNU Shares to Norwich Union
Shareholders on the following basis:
for every 100 Norwich Union Shares 48 New CGNU Shares
and so in proportion for any other number of
Norwich Union Shares.
Under the Scheme, Norwich Union's presently issued
share capital (other than certain Norwich Union
Shares held by the CGU Group) will be cancelled
and re-issued to CGU. CGU will therefore be the
listed holding company of the combined group and
will change its name to CGNU.
The Merger will be subject to the conditions and
further terms set out in Appendix V, including the
approval of the Merger by shareholders of both CGU
and Norwich Union as described below, satisfaction
of certain regulatory conditions and sanction of
the Scheme by the Court.
The Scheme will require approval by a special
resolution of Norwich Union Shareholders to be
proposed at an extraordinary general meeting of
Norwich Union. The Scheme will also require
approval separately by Norwich Union
Shareholders (other than certain shareholders who
will instead consent to be bound by the
Scheme) at a meeting to be convened by
direction of the Court. The approval required at
the Scheme Meeting is a majority in number
representing 75 per cent. in value of those
holders who vote at that meeting.
The Merger will also require approval by an
ordinary resolution of CGU Shareholders to be
proposed at an extraordinary general meeting of
CGU. Special resolutions to change the name of CGU
and to alter its articles of association will also
be proposed at this Extraordinary General
Meeting, although neither the Merger nor the
Scheme will be conditional on the passing of these
resolutions.
The Scheme can only become effective if all the
conditions to the Merger have been satisfied
or, where relevant, waived. The Scheme will
become effective upon the delivery to the
Registrar of Companies by Norwich Union of a copy
of the order of the Court sanctioning the Scheme
and the registration of such order. It is
expected that the Scheme will become effective
and that the Merger will take effect by early
June 2000.
8. Information on CGU
Created through the merger of Commercial Union and
General Accident in 1998, CGU is Europe's fifth
largest insurance company and the largest in the
UK, based on worldwide long term savings sales of
#7,094 million. The group operates in over 50
countries, with approximately 52,000 employees
worldwide and had total assets of #117 billion at
31 December 1999. CGU is one of the top 20 fund
managers based in Europe, with total assets
under management of #136 billion at 31 December
1999. For the year ended 31 December 1999, the
group had worldwide net premium income of #18,442
million, of which life and savings business
accounted for approximately 52 per cent.
CGU is one of the UK's leading providers of
life insurance, pensions and investment products.
It distributes through a range of channels
including IFAs, direct sales force, financial
institutions and estate agencies. The group is
the UK's second largest general insurer, with
leading positions in both commercial and
personal lines. The UK accounted for
approximately 38 per cent. of net premium income
and retail investment sales of #18,442 million
in 1999. The other key markets include
France, the Netherlands, Italy, Poland,
Ireland, Canada, Asia, Australia and New Zealand.
CGU is one of France's top ten life insurers,
the third largest life insurer in the
Netherlands, the largest general insurer in
Canada and a market leader in the rapidly growing
Polish life and pensions market. CGU intends to
dispose of its property and casualty business in
the US.
9. Information on Norwich Union
Norwich Union is a leading UK insurance group with
a range of international businesses. It has 10
million customers worldwide and approximately
19,000 employees. At 31 December 1999, it had
assets under management in excess of #71 billion
and for the year ended 31 December 1999 worldwide
net premium income and retail investment sales
of #8,004 million. It operates in the life and
general insurance markets, with life business
accounting for approximately 83 per cent. of
1999 operating profits.
Norwich Union is one of the UK's leading
providers of life insurance, pensions and
investment products. It distributes primarily
through the IFA channel. It is the UK's
fourth largest general insurer and is a highly
focused, direct and intermediary-based provider
of personal lines insurance. It also sells a
range of commercial insurance to small and medium
sized businesses. Its other European and
international businesses are focused on personal
lines insurance in the life and general insurance
markets and investment management. Its main
overseas businesses are in Australia, France,
Ireland, Poland, Spain and New Zealand.
10. Employees
The Boards believe that the prospects of
employees of CGU and Norwich Union generally will
be enhanced as a result of the strengthened
market position and growth prospects of the
combined group. It is expected that staff
reductions will arise across the combined
worldwide operations as a result of bringing the
two companies together. The integration process
is likely to take place over a period of 18 months
and every effort will be made to reduce the
number of compulsory job losses. CGNU will be
flexible to employee needs and will use a variety
of alternatives before implementing compulsory
redundancies. Communication and consultation
with employees will play a major part in the
integration process and there will be a fair
and transparent process for selection of
people. The process of consolidating employment
terms and conditions will be undertaken with
the full involvement of recognised employee
representative bodies.
CGNU is committed to policies and practices which
are expected to provide enhanced opportunities
for employees generally to learn and grow
through experience and training. Management and
staff positions are intended to be filled with
the best people from either CGU or Norwich Union.
Participants in the Norwich Union Share
Schemes will be advised separately in due
course of the impact of the Merger on their
entitlements and of the choices available to them.
11. Settlement, listing and dealing
Application will be made to the London Stock
Exchange for the New CGNU Shares to be admitted
to the Official List of the London Stock
Exchange. It is expected that listing of the New
CGNU Shares will become effective and that
dealings for normal settlement will commence on
the day on which the Scheme becomes
effective. Application will also be made for the
New CGNU Shares to be listed on the Paris Stock
Exchange where the existing shares are already
listed. In addition, CGNU will apply for the
listing of its shares (including the New CGNU
Shares) on the Irish Stock Exchange.
CGU Shareholders who hold their shares in
certificated form will retain their existing
certificates which will remain valid. New
certificates in the name of CGNU will be issued
when transfers to persons who wish to hold their
CGNU Shares in certificated form are
lodged for registration. Certificates for New
CGNU Shares to be issued to Norwich Union
Shareholders are expected to be despatched in June
2000 after the Scheme has become effective.
Further details on settlement, listing and
dealing will be included in the documents to be
sent to CGU and Norwich Union Shareholders.
12. Interests in shares
As at 31 January 2000, CGU companies in the UK
had interests in a total of 26,229,890 Norwich
Union Shares (1.35 per cent.) excluding any
stockbroking subsidiaries and shares held within
funds under management. In addition, certain
Directors of CGU are interested in a total of
2,060 Norwich Union Shares. Save for these
interests, CGU and the Directors of CGU are not
aware of any other interests of the CGU Group
or of the Directors of CGU in Norwich Union.
13. Recommendations
The Directors of CGU, who have been so advised
by Goldman Sachs International, financial
adviser to CGU, consider the terms of the
Merger to be fair and reasonable. In providing
advice to the Directors of CGU, Goldman Sachs
International has taken into account the
commercial assessments of the CGU Directors.
The Directors of CGU believe that the terms of
the Merger are in the best interests of CGU
Shareholders as a whole and will unanimously
recommend CGU Shareholders to vote in favour of
the resolutions relating to the Merger to be
proposed at the CGU Extraordinary General
Meeting as they intend to do in respect of
their own beneficial holdings.
The Directors of Norwich Union, who have been so
advised by Dresdner Kleinwort Benson, financial
adviser to Norwich Union, consider the terms of
the Merger (including the Scheme) to be fair and
reasonable. In providing advice to the Directors
of Norwich Union, Dresdner Kleinwort Benson
has taken into account the commercial
assessments of the Norwich Union Directors.
The Directors of Norwich Union believe that the
terms of the Merger (including the Scheme) are
in the best interests of Norwich Union
Shareholders as a whole and will unanimously*
recommend Norwich Union Shareholders to vote in
favour of the resolutions relating to the Merger
(including the Scheme) to be proposed at the
Norwich Union Scheme Meeting and the Norwich
Union Extraordinary General Meeting as they intend
to do in respect of their own beneficial holdings.
*Except for Guillermo de la Dehesa who is a Vice-
Chairman of Goldman Sachs Europe Limited (an
affiliate of Goldman Sachs International,
financial adviser to CGU) and will abstain from
the recommendation to Norwich Union Shareholders.
14. General
As noted above, completion of the Merger requires
approval by CGU Shareholders and approval of the
Scheme by Norwich Union Shareholders. A
circular summarising the background to and
reasons for the Merger, including a notice
convening the CGU Extraordinary General
Meeting, will be sent to CGU Shareholders in due
course together with, for information only, the
formal Scheme documentation incorporating summary
listing particulars relating to CGNU.
The formal Scheme documentation, incorporating
summary listing particulars relating to CGNU and
notices convening the Scheme Meeting and the
Norwich Union Extraordinary General Meeting will
be sent to Norwich Union Shareholders in due
course.
Enquiries:
CGU (020) 7283 2000 Norwich Union (020) 72697188
Bob Scott Richard Harvey
Peter Foster Mike Biggs
Goldman Sachs International (020) 7774 1000
Andrew Chisholm
John Reizenstein
Dresdner Kleinwort Benson (020) 7623 8000
Henry Somerset
Henrietta Baldock
Hoare Govett Cazenove & Co.
(020) 7678 8000 (020) 7588 2828
Peter Meinertzhagen John Paynter
Andrew Thompson Tim Wise
Dresdner Kleinwort Benson
(020) 7623 8000
Jonathan Roe
Maitland (020) 7379 5151
Angus Maitland
Laura Frost
Financial Dynamics(020) 7831 3113
Charles Watson
Alex Child-Villiers
Liddell Thomson (Scotland only) (0141) 221 5775
Colin Liddell
Transaction Press Office (020) 7269 7188
There will be a presentation today to analysts at
9.15 am and to journalists at 12.00 pm. Both
will be held at Stationers' Hall, Ave Maria Lane,
London EC4.
In this press announcement, comparative rankings
are based on figures for the calendar year 1998
unless otherwise stated. Assets and premium
income rankings are based on figures for the
calendar year 1999. In this press
announcement, the calculation of the percentage
ownership of CGNU by former Norwich Union
Shareholders and CGU Shareholders following the
Merger assumes that no further shares of Norwich
Union or CGU are issued prior to the Merger
becoming effective.
Goldman Sachs International, which is regulated in
the United Kingdom by The Securities and
Futures Authority Limited, is acting exclusively
for CGU and no-one else in connection with the
Merger and will not be responsible to anyone
other than CGU for providing protections afforded
to customers of Goldman Sachs International, or
for giving advice in relation to the Merger.
Kleinwort Benson Limited ("Dresdner Kleinwort
Benson"), which is regulated by The Securities
and Futures Authority Limited, is acting
exclusively for Norwich Union and no-one else in
connection with the Merger and will not be
responsible to anyone other than Norwich Union
for providing the protections afforded to
customers of Dresdner Kleinwort Benson, or for
giving advice in relation to the Merger.
The New CGNU Shares to be issued pursuant to the
Scheme 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.
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